FTX Cuts Disputed Claims Reserve by $1.9B to Unlock Cash for Creditors

FTX Trading Ltd. and the FTX Recovery Trust have announced the initiation of a new cash distribution round for eligible creditors, following a $1.9 billion reduction in the disputed claims reserve. This adjustment, approved by the Delaware Bankruptcy Court, lowers the reserve from $6.5 billion to $4.3 billion, freeing funds for creditors with permitted claims, including Class 5 Customer Entitlement Claims and Class 6 General Unsecured Claims [1]. Distributions are expected to commence by September 30, 2025, with prior payouts totaling approximately $6.2 billion since the exchange’s collapse in November 2022 [1].

Eligible claimants must complete Know Your Customer (KYC) verification, submit tax documentation, and onboard with approved distribution partners such as BitGo, Kraken, and Payoneer by August 15, 2025. Failure to meet these requirements will disqualify claimants from receiving payments [1]. The process aligns with FTX’s broader restructuring efforts to resolve insolvency issues while adhering to regulatory compliance.

A significant legal challenge remains in 49 jurisdictions, including China, Russia, and Pakistan, where FTX seeks court approval for a Restricted Jurisdiction Procedure. This framework would determine whether claimants in these regions can receive distributions. An omnibus hearing to address this matter is scheduled for July 2025 [1]. Claims in restricted jurisdictions total approximately $800 million, with China accounting for 82% of this amount [1]. Critics, including a Chinese creditor representing over 300 users, argue against penalizing claimants based on regulatory assumptions, advocating for alternative legal pathways [1].

The FTX Recovery Trust has emphasized its strategy to mitigate cryptocurrency volatility by distributing cash equivalents instead of digital assets. This approach mirrors traditional bankruptcy practices and leverages institutional custodians like Kraken and BitGo to ensure compliance and oversight [1]. The decision to reduce the disputed claims reserve and prioritize cash distributions is positioned as a milestone in improving transparency and streamlining creditor repayment [1].

The ongoing legal and operational complexities highlight the challenges of navigating cross-border insolvency. While the $1.9 billion release underscores progress in FTX’s restructuring, unresolved issues in restricted jurisdictions and the scale of remaining claims underscore the need for cautious optimism. The July 2025 hearing will be critical in determining equitable access to funds for all stakeholders.

Source: [1] [title] [https://www.livebitcoinnews.com/ftx-launches-next-cash-payout-round-after-1-9b-claims-reserve-cut/]