In a major shakeup in the ongoing FTX bankruptcy case, nearly 400,000 customer claims—totaling up to $2.5 billion—have been rejected due to failure to meet Know Your Customer (KYC) requirements. The U.S. Bankruptcy Court confirmed on April 2 that 392,000 claims were disqualified after users missed the March 3 identity verification deadline.
This significant culling of unverified claims could benefit verified creditors, who are now in line for potentially higher recovery rates. With FTX preparing to begin repayments on May 30, the development marks a turning point in one of the most complex crypto bankruptcies in history.
KYC Failures Lead to Massive Rejections
The rejected claims span over 2,377 pages in court documents and include both small and large account holders. Creditor advocate Sunil Kavuri estimates the total value at around $2.5 billion, including $655 million in claims under $50,000 and $1.9 billion in larger sums. The disqualification reflects FTX’s renewed focus on compliance—something the exchange largely ignored under its former leadership.
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Why Verification Is Now Critical
The exchange’s new management emphasizes that robust KYC enforcement is essential to prevent fraudulent submissions. Previous failures to implement standard identification protocols left the door open for inflated and false claims—one filing even mentioned receiving over “27 quintillion” submissions.
What’s Next: Repayments Begin May 30
FTX has recovered approximately $11.4 billion in assets and aims to repay verified creditors in full, based on asset values as of November 2022—the month of its collapse. While the road to recovery has been turbulent, the upcoming repayments could offer some closure for affected users.
Meanwhile, crypto markets remain volatile. Bitcoin slipped 1% to $83,645, and Ethereum dropped 0.6% to $1,815. As legal battles like FTX’s continue, investor sentiment remains cautious.
The fallout from FTX’s collapse still casts a long shadow—but for verified creditors, relief may finally be in sight.
Disclaimer: The information in this article is for general purposes only and does not constitute financial advice. The author’s views are personal and may not reflect the views of Chain Affairs. Before making any investment decisions, you should always conduct your own research. Chain Affairs is not responsible for any financial losses.
I’m a crypto enthusiast with a background in finance. I’m fascinated by the potential of crypto to disrupt traditional financial systems. I’m always on the lookout for new and innovative projects in the space. I believe that crypto has the potential to create a more equitable and inclusive financial system.
