FTX Trading Ltd, the defunct crypto platform is exploring options to reduce its tax liability to its largest creditor, the US Internal Revenue Service (IRS).
FTX Argues Tax Agreement With IRS
According to the legal document filed on June 3, FTX plans to settle with the IRS by paying a $200 million primary tax claim and a $685 million secondary claim.
In the continued saga between the struggling exchange and the country’s tax agency, this latest development marks a major twist. Initially, the IRS asserted that FTX owed over $44 billion in taxes. While the exchange did not dispute owing these taxes, it contested the sum and reasons for the tax debt. Later, the sum was subsequently decreased.
FTX founder and former CEO, Sam Bankman-Fried, who faced allegations regarding fund misappropriation and tax liabilities belonging to customers, has been at the center of the dispute between the FTX Debtors and the revenue agency.
The FTX Debtors, managing the company amid bankruptcy, disputed IRS’s inclusion of funds misused by Sam Bankman-Fried in assessments, and also argued against taxation on ex-CEO’s misappropriated funds. In response to the filing, the IRS opposes the Debtors’ claims and intends to pursue substantial tax debts if no agreement is made.
The finalization of the settlement hinges on the court’s approval of FTX’s reorganization strategy. The deadline for objections is June 17, with the hearing set for June 25, 2024.
While the tax charges heat up, Bankman-Fried is locked up, and Ryan Salame, one of the co-founders of FTX, recently bagged a seven-and-a-half-year prison term after pleading guilty to criminal charges against him.
FTX’s Plans To Repay Its Creditors
In contrast to Gemini Exchange’s seamless repayment plan to its Earn program investors, FTX’s proposed plan to completely settle creditors’ debts and even offer extra compensation has gotten many displeased.
The exchange said creditors with only claims below $50,000 will qualify for a 118% reimbursement. The repayments will be calculated based on the asset values at the time of FTX’s collapse in November 2022.
Higher equity investors will also get a refund at a lower percentage.
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