FTX denies claims worth millions over missed KYC deadline

FTX has denied claims of users who failed to start their Know Your Customer (KYC) process by March 3, 2025. This follows an order by the US Bankruptcy Court allowing the exchange to publish the denied claims and expunge them from its list of liabilities.

Although the exchange did not state the cost of the claims it denied, one X (formerly Twitter) user, Mr Purple, estimated that claims were worth around $300 million.

He said:

“There’s probably about 400k claims on here! However, if you look at the estimated allowed claims <$50k, there was 457k of them with a total of $344mm in Petition Date value. So, I’d now assume this reduces the liabilities by $300mm.”

Interestingly, the exchange could still deny more claims. FTX Creditor champion Sunil Kavuri noted that FTX plans to expunge claims that fail to complete the KYC process by June 1, 2025, the deadline.

A note in the court order reads:

“Claims listed on Schedule 1 to the Order but not included on Exhibit A attached hereto may still be subject to disallowance if the holder of any such claim does not submit all KYC information requested by the FTX Recovery Trust or its KYC vendors on or prior to June 1, 2025 at 4:00 p.m. (ET) (the ‘KYC Submission Deadline’).”

If all these claims are denied, Kavuri estimates it would save about $2.5 billion in liabilities, with $655 million for creditors below $50,000 and $1.9 billion for creditors above $50,000.

Meanwhile, the report of FTX expunging claims has attracted complaints and criticisms from creditors, who noted that they could not complete the KYC despite submitting all the documents. Some users have also complained that the exchange did not give them any feedback on why their claims are disputed.

Interestingly, the FTX administrator did not disclose how to spend the savings from the denied claims. However, the exchange plans to start the next phase of its repayment by May 30. The exchange’s European creditors are also likely to get their repayments soon after the company that acquired FTX Europe, Backpack, launched its claims page on April 1.

FTX creditors in restricted countries are still waiting for updates

While FTX creditors in the US and Europe are finally getting some clarity on their repayments, a group of FTX creditors remain uncertain about their prospects. These creditors in over 160 countries were excluded from the first phase of its recovery claims.

Kavuri disclosed in February that the exchange had excluded several countries, including Nigeria, Egypt, Colombia, Russia, China, Ukraine, and Saudi Arabia, from the first phase of recovery and is working on a recovery solution for them. At the time, his post provided some clarity for the FTX creditors in these countries who have been waiting for the opportunity to get their refunds.

However, users in these countries are still waiting for repayment or any information on their status, with one creditor asking Kavuri for an update on when they will be paid. Since Kraken and BitGo, the two distribution options FTX has provided for its claims, are unavailable in most countries on the excluded list, it looks unlikely that they will be paid in May.

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