- FTX’s repayment process may discard over $2.5 billion in customer claims due to KYC issues.
- FTX has disqualified nearly 400,000 claims already for failing to meet KYC requirements.
- FTX continues rejecting claims, setting June 1 as the final KYC submission deadline.
FTX’s long and complex repayment process continues to rage on, and a new chapter has just popped up. Said chapter could see over $2.5 billion in customer claims thrown out, with the exchange already disqualifying nearly 400,000 of these due to failures in KYC.
While some customers are preparing to receive their funds, others — especially those in restricted countries — remain in the dark.
Close to 400,000 Claims Already Expunged
A 2nd April filing with the US bankruptcy court for the District of Delaware revealed that FTX had just disqualified 392,000 claims. These claims were thrown out for failing to meet KYC requirements by the 3 March deadline. These claims have officially been “disallowed and expunged in their entirety,” according to the court documents in a staggering 2,377 pages.
Initially, the value of these rejected claims were an estimated 41 billion. However, according to Sunil Kavuri, an FTX creditor advocate, the true amount could be more than $2.5 billion. Kavuri says that this is divided into $655 million worth of claims under $50,000, and approximately $1.9 billion in larger claims.
Said disqualified claims are part of a broader $3.36 billion in disputed claims that FTX has flagged in its reserves. The bankruptcy team sees this as a necessary step, considering the exchange’s failure to gather proper KYC data under its previous leadership.
Final Deadline Set for June 1
As it stands, the worst is yet to come. FTX isn’t done throwing out claims yet, and has set a final KYC submission deadline for 1 June. Anyone who fails to submit the required KYC documents by that date risks having their claims denied permanently. According to Kavuri, if all unverified claims are eventually pushed out, FTX could reduce its liabilities by more than $2.5 billion.
For a company seeking to increase its recoveries and payouts, the reduction could do much to affect how much verified creditors receive at the end of the day. Despite the court’s approval of this approach, many affected users continue to express frustration.
For example, many of these claim that they submitted all the required documents but still received no feedback. Others say that they were unaware that their claims were denied, until the list became public.
Crypto Community Reactions
Critics argue that the exchange has not been transparent about its reasons for rejecting some claims. Furthermore, FTX has yet to explain how it means to spend the money it saved from these denied claims. Will the extras be redistributed to verified creditors, or will they be spent elsewhere for administrative costs and legal fees?
This lack of clarity continues to be a major problem for users who have already spent over two years waiting for compensation since the exchange collapsed. FTX is preparing to distribute repayments by 30 May and has reportedly gathered around $11.4 billion in assets. Despite the ongoing issues, FTX’s legal team said it has received “27 quintillion” total submissions, with many of them being either fake or inflated.
Furthermore, while U.S. and European creditors are starting to see a path forward, customers in nearly 170 countries continue to be exempt from this repayment process. Countries like Nigeria, Egypt, Colombia, Russia, China, Ukraine, and Saudi Arabia remain in the dark, as users remain unable to submit claims. As the final KYC deadline approaches on June 1, the claim disqualifications are expected to grow higher as the crypto industry continues to speculate.
