Bankrupt FTX has received court approval to reject creditor claims from users who failed to begin the Know Your Customer (KYC) process before March 3, 2025.
The April 2 court filing includes 2,378 pages of invalidated claims, representing around 500,000 entries. The court order clearly disallows any claim listed that is not backed by KYC compliance.
According to the filing:
“In accordance with the Order, each claim set forth on Exhibit A attached hereto has been expunged and disallowed in its entirety.”
FTX creditors were previously advised to complete KYC steps to retain eligibility for payouts.
Sunil Kavuri, a known activist for the creditor community, stated on social media that more claims will be removed after June 1 if required documentation remains missing.
He added that the exchange could disqualify up to $655 million in claims under $50,000 and around $1.9 billion in more significant claims if users fail to submit KYC documents.
Another FTX creditor advocate, who goes by the alias “Mr Purple,” shared a slightly different perspective. He noted that out of 457,000 smaller claims, the estimated value stood at $344 million. Based on updated figures, he believes FTX’s total liabilities may drop by roughly $300 million.
FTX bankruptcy process
This update comes just weeks before FTX begins processing repayments for claims exceeding $50,000, scheduled to start on May 30.
The move marks a significant step forward in the lengthy and contentious bankruptcy case that began in November 2022.
Meanwhile, creditors with smaller claims, labeled “convenience claims” by the estate, have already received payments in February.
Backpack, the exchange that acquired FTX’s European unit, has also begun assisting affected users. Former FTX EU customers have been asked to create accounts, submit KYC documents, and link their old claim data to the new platform.
However, the platform has yet to provide a timeline for when it would begin the repayment.
Despite these developments, creditors in countries like China, Russia, Egypt, Nigeria, and Ukraine remain excluded from all distributions.
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