Bankrupt FTX, a cryptocurrency exchange, has recently received court approval to reject creditor claims from users who failed to complete the mandatory Know Your Customer (KYC) process before March 3, 2025. The court filing on April 2 contained a staggering 2,378 pages of invalidated claims, totaling around 500,000 entries. The court order explicitly states that any claim not supported by KYC compliance will be disallowed.
FTX creditors had been previously advised to ensure they completed the KYC steps to maintain their eligibility for potential payouts. Sunil Kavuri, a prominent activist for the creditor community, took to social media to warn that more claims could be eliminated after June 1 if the necessary documentation is still missing. He highlighted that the exchange might disqualify up to $655 million in claims under $50,000 and approximately $1.9 billion in larger claims if users fail to submit their KYC documents.
Another advocate for FTX creditors, known as “Mr Purple,” provided a different perspective. He mentioned that out of the 457,000 smaller claims, the estimated total value was $344 million. With updated figures, he speculated that FTX’s overall liabilities could decrease by roughly $300 million.
The bankruptcy process of FTX is progressing, with repayments for claims exceeding $50,000 set to commence on May 30. This marks a significant milestone in the ongoing and contentious bankruptcy case that began in November 2022. Creditors with smaller claims, referred to as “convenience claims” by the estate, have already received payments in February.
Backpack, the entity that acquired FTX’s European unit, has started aiding affected users. Former FTX EU customers are required to create accounts, submit KYC documents, and connect their old claim data to the new platform. However, a specific timeline for repayment has not been provided yet.
Despite these advancements, creditors from countries such as China, Russia, Egypt, Nigeria, and Ukraine are still excluded from any distributions. The situation remains complex, with various stakeholders navigating through the aftermath of FTX’s bankruptcy.
As the cryptocurrency industry continues to evolve, the FTX case serves as a reminder of the importance of regulatory compliance and transparency in the sector. Users and investors are encouraged to stay informed and vigilant to protect their interests in the ever-changing landscape of digital assets.