FTX Creditors Risk Losing $2.5 Billion Due To KYC Verification Failures

Nearly 400,000 creditors of the bankrupt cryptocurrency exchange FTX are at risk of losing access to $2.5 billion in repayments due to failures in completing the required Know Your Customer (KYC) verification process. According to a recent court filing, approximately 392,000 FTX users have not initiated or completed the mandatory KYC process, which is crucial for establishing claim eligibility.

The original deadline for users to begin the verification process was set for March 3, 2025. However, this deadline has been extended to June 1, 2025, providing users with additional time to verify their identity and secure their claims. This extension is a critical opportunity for affected users to ensure they do not lose their funds.

The court documents reveal that claims under $50,000 could account for approximately $655 million in potentially disallowed repayments. Claims over $50,000 make up a much larger portion, possibly amounting to $1.9 billion in at-risk funds. These claims have already been “disallowed and expunged in their entirety” according to the filing, though the extended deadline offers a second chance for users to complete the verification process and reclaim their funds.

Many FTX users have reported difficulties with the KYC process. Users who were unable to submit their documentation can restart the verification process. Impacted users should email FTX support at support@ftx.com to receive a ticket number. They can then log in to the support portal, create an account, and re-upload the necessary KYC documents. This verification requirement comes after FTX, under its previous leadership, failed to collect key user data or conduct basic due diligence. The current management team has implemented these measures as part of the bankruptcy proceedings to ensure compliance and transparency.

FTX plans to begin its next round of creditor repayments on May 30, 2025. This payout will target creditors with claims over $50,000, with more than $11 billion expected to be distributed. Under FTX’s recovery plan, 98% of creditors are expected to receive at least 118% of their original claim value in cash. The company has gathered $11.4 billion for distributions and is offering full cash recoveries based on asset values at the time of its November 2022 collapse. FTX’s Bahamian subsidiary, FTX Digital Markets, processed the first round of repayments in February 2025, distributing $1.2 billion to creditors.

The crypto industry continues to recover from the collapse of FTX and its more than 130 subsidiaries. This failure triggered a series of insolvencies that led to a prolonged crypto winter. Despite making progress with creditor repayments, FTX’s bankruptcy process remains complex. The company’s legal team reported receiving a vast number of total submissions, with many being fraudulent or inflated claims that require verification and validation. Users who fail to complete the KYC process by the new June 1 deadline may have their claims permanently disqualified, losing access to their funds entirely.