Nearly 400K client claims have been rejected by the bankrupt crypto exchange FTX because consumers did not confirm their identity by the rigorous March 3 deadline.
The filing made by the company in the US Bankruptcy Court for the District of Delaware attests to the fact that 392,000 claims were rejected and eliminated entirely.
FTX Disqualifies 392,000 Customer Claims Worth $2.5 Billion
These claims span over 2,377 pages in the official documentation. Early estimates placed the unverified claims at about one billion dollars, but new estimates suggest a much higher figure.
According to creditor lawyer Sunil Kavuri, claims totaling more than $2.5 billion could be rejected. He clarified that while larger claims number around $1.9 billion, those under $50,000 total about $655 million.
KYC Violations and Broader Impact
The disqualified claims form part of a broader total of $3.36 billion in projected disallowed claims.
Since the business under the previous leadership failed to gather important user data or perform basic due diligence, the procedure is crucial for FTX.
This KYC oversight has led to significant losses for the claimants who failed to comply.
The lack of proper identity verification highlights deep issues in FTX’s past operational practices. The company has now taken strict measures to enforce compliance and safeguard future transactions.
Asset Recovery and Repayment Plan
FTX announced that it would start repaying its main creditors by the end of May. The exchange has successfully recovered approximately $11.4 billion in assets so far. This recovery marks a significant milestone in the ongoing bankruptcy proceedings.
The repayment plan is designed to restore some confidence among creditors. The process will involve thorough checks and careful distribution of the recovered funds. The company hopes that these steps will help stabilize the financial situation for its creditors.
Phishing Scam Warning
In addition to the KYC issues, FTX creditors face a new threat from a phishing scam. A representative of FTX creditors, Sunil, warned that scammers are targeting those owed money by the bankrupt exchange.
The scam attempts to steal sensitive information by pretending to represent FTX. Creditors are urged to be extremely cautious and verify any communication before sharing personal data.
The warning comes at a time when uncertainty and fear are high among affected users. FTX is urging users to follow official updates to avoid falling victim to fraud.
FTX’s decision to disqualify nearly 400,000 customer claims underscores the serious impact of past KYC noncompliance. The disqualification affects billions of dollars and has significant consequences for creditors.
The asset recovery efforts and repayment plan offer a glimmer of hope during financial turmoil. However, the phishing scam warning adds another layer of concern for those waiting for their payouts.
Also Read: Backpack Exchange Acquires FTX EU, Begins Asset Recovery For Former Users