TLDR

Almost 400,000 FTX creditors may forfeit $2.5 billion by failing to complete mandatory KYC verification
The verification deadline was extended from March 3 to June 1, 2025
Smaller claims under $50,000 represent $655 million at risk, while larger claims account for $1.9 billion
FTX plans to distribute over $11 billion to verified creditors on May 30, 2025
Most verified creditors are expected to receive 118% of their original investment value

Almost 400,000 former FTX customers are on the verge of losing $2.5 billion in cryptocurrency repayments because they haven’t completed required identity verification. A recent bankruptcy court filing reveals that 392,000 creditors have yet to begin the Know Your Customer (KYC) verification process needed to receive their funds.

The failed cryptocurrency exchange initially required users to start verification by March 3, 2025. Recognizing the scale of the problem, administrators have extended this deadline to June 1, 2025, providing a final chance for affected users to qualify for repayment.

Court documents filed on April 2 in the US Bankruptcy Court for the District of Delaware outline the massive scope of potentially disallowed claims. The filing states that claims not verified by the deadline “shall be disallowed and expunged in their entirety.”

The Scale of Unclaimed Assets

The potential losses are divided between retail and larger investors. Court filings show approximately $655 million in smaller claims under $50,000 may be disqualified. An additional $1.9 billion in larger claims over $50,000 also remains unverified.

These figures represent a key portion of the $3.36 billion in projected disallowed claims that FTX has disclosed in its reserve breakdown. The exchange noted that verification is essential because the previous management failed to collect basic user information or conduct proper due diligence.

Many users have encountered technical difficulties with the verification system. According to Sunil Kavuri, an FTX creditor and Customer Ad-Hoc Committee member, affected users can restart the process by contacting FTX support.

Users who need to complete verification should email support@ftx.com to obtain a ticket number. They can then create an account on the support portal and upload their identity documents to maintain claim eligibility.

Recovery Progress and Distribution Timeline

While the KYC issues continue, FTX’s bankruptcy process is moving forward. The exchange has accumulated $11.4 billion for distributions to creditors with verified claims.

The next major distribution is scheduled for May 30, 2025. This round will primarily target creditors with claims exceeding $50,000, representing the largest portion of the repayment process.

FTX has already made some progress in its repayment efforts. The exchange’s Bahamian subsidiary processed an initial $1.2 billion distribution to creditors in February 2025.

Under the current recovery plan, most creditors with verified claims will receive better returns than initially expected. Court documents indicate that 98% of verified creditors should receive at least 118% of their original claim value in cash.

This recovery rate exceeds initial expectations from when FTX collapsed in November 2022. At that time, many creditors feared they might recover only pennies on the dollar.

Challenges in the Bankruptcy Process

FTX administrators face numerous hurdles beyond the KYC verification issues. The bankruptcy team reports receiving “27 quintillion” total claim submissions, with many being fraudulent or artificially inflated.

The crypto industry continues to deal with the aftermath of FTX’s collapse. The exchange’s failure, along with more than 130 subsidiaries, triggered a series of insolvencies throughout the sector.

This chain reaction led to what many consider the crypto industry’s longest downturn. During this period, Bitcoin’s price fell to approximately $16,000, less than a quarter of its current value.

Market analysts see the FTX repayment process as a positive development for the industry. Alvin Kan, chief operating officer at Bitget Wallet, suggests that a large portion of the repaid funds may flow back into cryptocurrency markets as investors reinvest their recovered assets.

The extended June 1 deadline represents a critical final opportunity for hundreds of thousands of former FTX users. Those who complete verification stand to recover more than their initial investments, while those who miss the deadline may permanently lose their claims.

The post FTX Extends KYC Deadline as 392,000 Users Risk Losing $2.5 Billion in Claims appeared first on CoinCentral.

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Filed under: News - @ April 7, 2025 11:23 am