FTX Users Face $2.5 Billion Loss Due To Missed Verification Deadline
2min read Nearly 400,000 former users of FTX are at risk of losing approximately $2.5 billion in repayments due to their failure to complete identity verification by the March 3 deadline. This significant development comes as the collapsed crypto firm progresses with its repayment plans, but only for those who met the required identity verification standards.
The U.S. Bankruptcy Court confirmed that 392,000 claimants who did not complete the identity verification process by the specified deadline have had their claims removed. These denied claims, which were detailed in over 2,377 pages of court filings, were initially estimated to be worth around $1 billion. However, creditor advocate Sunil Kavuri disclosed that the total value of these claims could reach $2.5 billion. This includes $655 million in smaller claims under $50,000 and another $1.9 billion in larger claims. The court denied these claims because the users did not submit the required identification documents before the deadline.
FTX, now under new management, emphasized that verifying users is a crucial step in the repayment process. The company stated that its former leadership did not follow basic procedures like Know Your Customer (KYC) checks, which contributed to the current issues. The new management is implementing stricter standards as part of the legal process to clean up the mess left behind by the previous administration. Many experts believe this approach is necessary to get the business back on track without any unresolved matters.
The exchange plans to begin payments to approved creditors on May 30, 2025. According to management, the payouts will be made in cash based on the value of assets at the time of the exchange’s collapse in November 2022. So far, the company has recovered $11.4 billion, which will be shared among users whose claims have been approved. For many, this marks the first real progress since the exchange shutdown.
The new management acknowledged that the process has not been straightforward. FTX’s legal team reported receiving over 27 quintillion submissions, many of which were false or inflated. Sorting through these fake claims has slowed progress, but the company remains committed to closing one of the largest financial disasters in crypto history. The recent shift in the FTX bankruptcy case, where a Delaware court sided with Three Arrows Capital (3AC), allowing the defunct hedge fund to raise its claim against FTX from $120 million to $1.53 billion, further complicates the situation.
Many FTX users have reported problems with the KYC process. However, users who were unable to submit their KYC documentation can resubmit their application and restart the verification process. Impacted users should email FTX support to receive a ticket number, then log in to the support portal, create an account, and re-upload the necessary KYC documents.
FTX’s Bahamian subsidiary, FTX Digital Markets, processed the first round of repayments in February, distributing $1.2 billion to creditors. The crypto industry is still recovering from the collapse of FTX and more than 130 subsidiaries launched a series of insolvencies that led to the industry’s longest-ever crypto winter. While not a “market-moving catalyst” in itself, the beginning of the FTX repayments is a positive sign for the maturation of the crypto industry, which may see a “significant portion” reinvested into cryptocurrencies.
