FTX and IRS Secure Settlement Approval in $24B Debt Claim

The months-long tussle will come to a close with the payment of a significantly lower sum.

John J. Ray iii sitting on an empty and blank FTX land. Looking at the spotlight hitting him.
Created by Kornelija Poderskytė from DailyCoin
  • Defunct exchange FTX and the United States Internal Revenue Service (IRS) are locked in a dispute over an unpaid tax claim.
  • FTX and the IRS have reached a settlement agreement.
  • The exchange’s creditors are still awaiting repayment.

Fallen crypto exchange FTX is still picking up its pieces, burdened by outstanding debts to creditors and regulatory obligations. In October 2023, the U.S Internal Revenue Service slapped the exchange and its affiliate, Alameda Research, with a hefty $44 billion bill, citing accumulated unpaid taxes spanning several months.

Following a prolonged struggle and a substantial reduction in the amount owed, FTX’s financial troubles are easing even further 

FTX to settle with the IRS

According to a June 3, 2024 filing, the United States Bankruptcy Court for the District of Delaware has approved the settlement request between FTX Trading Ltd and the IRS, aiming to conclude the months-long dispute.


The approved settlement significantly lowers FTX’s total payable amount to $885 million, a substantial decrease from the IRS’s initial $44 billion claim and its later reduction to $24 billion. This reduction followed FTX’s argument against its responsibility for funds misappropriated by its founder, Sam Bankman-Fried, asserting that such a high amount would hinder its ongoing creditor settlement process.

“The Debtors vigorously dispute the IRS Claims in many crucial respects including, among other things, the income tax liability for so-called ‘misappropriation income’ as a result of Sam Bankman-Fried’s theft of FTX customer funds, the employment tax liability for purported compensation paid to Mr. Bankman-Fried and other former principals of the Debtors,” stated the filing.

While the firm acknowledged its tax obligations, FTX contended that the Internal Revenue Service’s calculation and cited reasons for the liability were significantly erroneous.


The new $885 million bill is payable in two parts: a $200 million priority tax claim, which must be settled within 60 days of the effective date of approval, and an additional $685 million subordinated claim, payable after compensating other creditors and customers.

FTX’s Creditor Settlement Process

The 2022 financial collapse of FTX resulted in significant losses for many users, leaving the exchange with an $11 billion debt owed to approximately two million customers and other creditors.

In recent months, efforts to compensate these customers have gained momentum, with the exchange announcing plans to reimburse users for their losses plus interest. So far, FTX has amassed up to $16.3 billion for distribution, primarily acquired from asset sell-offs and investment returns.

FTX is expected to commence distributions within 60 days of securing approval for its settlement plan, and according to the exchange’s current CEO, John Ray III, creditors with allowed claims below $50,000 would be eligible for 118% compensation 

On the Flipside

Why This Matters

FTX’s resolution of its tax debt with the Internal Revenue Service (IRS) substantially alleviates its financial strain, and could potentially expedite its repayment commitment to creditors.

Read more about FTX’s investment returns and asset sell-offs:
FTX Cashes Out of Anthropic, Rakes in $800M Profit 

Worldcoin regulatory woes have continued to expand, read more on the latest:
Worldcoin Halts Operations In Spain Amid Regulatory Probe

This article is for information purposes only and should not be considered trading or investment advice. Nothing herein shall be construed as financial, legal, or tax advice. Trading forex, cryptocurrencies, and CFDs pose a considerable risk of loss.

Grace Abidemi

Grace Abidemi, a cryptocurrency reporter at DailyCoin, covers industry developments and trends. She previously worked as a freelance writer. With a Bachelor's degree in German Language and certifications in marketing and storytelling, Grace creates engaging content. When not working, she's in Nigeria, mastering cooking and canvas painting, and enjoys learning about different cultures and languages.