The bankrupt FTX has secured court approval to reject claims from users who did not initiate the Know Your Customer (KYC) process before March 3, 2025.
The court filing from April 2 spans 2,378 pages of claims that have been deemed invalid, accounting for roughly 500,000 entries. The court’s ruling explicitly prohibits any claim that lacks KYC compliance.
The filing states:
“As per the Order, each claim detailed in Exhibit A attached hereto has been completely expunged and denied.”
Creditors of FTX were previously instructed to undertake the KYC process to maintain their eligibility for any future payouts.
Sunil Kavuri, a recognized advocate for creditors, mentioned on social media that additional claims will be eliminated after June 1 if the necessary documentation is still not provided.
He warned that the exchange could reject up to $655 million in claims under $50,000 and approximately $1.9 billion in larger claims if users neglect to submit the required KYC documentation.
Another supporter of FTX creditors, known as “Mr Purple,” offered a slightly different viewpoint. He pointed out that among 457,000 smaller claims, the total estimated value reached $344 million. Given recent updates, he speculated that FTX’s total liabilities could decrease by around $300 million.
FTX Bankruptcy Proceedings
This update arrives just weeks before FTX is set to commence repayments for claims exceeding $50,000, which are slated to begin on May 30.
This move represents a crucial advancement in the protracted and complex bankruptcy case that commenced in November 2022.
In the meantime, creditors with smaller claims, referred to as “convenience claims” by the estate, have already started receiving payments as of February.
Backpack, the firm that took over FTX’s European division, is also providing support to affected users. Former customers from FTX EU have been instructed to create new accounts, submit their KYC documents, and link their previous claim information to the new platform.
However, a timeline for when repayments will commence has not yet been provided by the platform.
Despite these updates, creditors from countries such as China, Russia, Egypt, Nigeria, and Ukraine continue to be excluded from any distributions.