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Who's not getting paid in the FTX bankruptcy

Photo illustration of SBF looking down at a giant outstretched Uncle Sam hand.

Photo illustration: Aïda Amer/Axios. Photo: Photo by Gotham/GC Images

The U.S. Internal Revenue Service was at one point the largest creditor in the FTX bankruptcy, based on its own estimates, seeking a heavily debated $24 billion last year.

Why it matters: FTX's reorganization plan, which would pay customers back in full with interest, hinges on government agencies' getting a fraction of their original claims.

Driving the news: The IRS will be paid $200 million and is expected to get none of the $685 million it agreed to subordinate in the plan, per a source with knowledge of the matter.

  • That comes after the IRS previously estimated its claims downward from $24 billion to $12 billion, and to $8 billion as of March, according to FTX.
  • The math behind these figures has been highly contested. FTX has called the claims "meritless," saying it has no tax liability and in fact has over $11 billion in net taxable losses.
  • Other government entities, including the SEC and CFTC, are also expected to get between 2% and 17% of an estimated $2 billion in submitted fines and penalties for crimes committed during the Sam Bankman-Fried era.
  • Also not expected to get anything back: investors Sequoia and Tiger.

Zoom in: The recovery assumes the estate can claw back "conservative" amounts from ongoing lawsuits and threats of lawsuits, per the source.

  • As of March, such litigation "and the threat of such litigation, has resulted in the recovery of hundreds of millions of dollars of improper transfers made at the direction of Mr. Bankman-Fried," FTX chief executive John J. Ray III wrote in letter to the judge overseeing Bankman-Fried's sentencing.
  • It's still active in suits against Bybit (in which it seeks $953 million), LayerZero Labs ($21 million), and Sam Bankman-Fried's parents (from whom it seeks to recover "millions of dollars").

The intrigue: FTX customers will say they were stiffed, as they'll get cash in return for tokens — missing out entirely on the recent crypto rally.

  • This, the estate acknowledged, throws the blame squarely on Bankman-Fried's shoulders. FTX's press release notes it had just 0.1% of the Bitcoin and only 1.2% of the Ethereum customers believed it held at the time of its bankruptcy filing.
  • "Accordingly, the debtors have not been able to benefit from the appreciation of these missing tokens during the Chapter 11 cases," FTX's press release on its new plan read.

The big picture: Bankman-Fried's lawyers have argued there was "zero" harm to FTX's customers — but they've had a hard time finding an audience receptive to that assertion.

What we're watching; The Bankruptcy Court will meet June 25 to establish a voting process for the plan.

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