The FTX bankruptcy case, one of the most high-profile in crypto industry history, is nearing its conclusion. Only one disputed issue remains on the court's agenda, with a hearing scheduled for August 19. This is the final hurdle before the multi-year process comes to a close, and its outcome matters to thousands of creditors worldwide.
The matter concerns a motion filed by a customer named Daijo Chen, who missed the verification deadline and is now asking Judge Karen Owens for a second chance. Chen submitted his request on March 27, citing Federal Rules of Civil Procedure 59(e) and 60(b)(2), which allow for reconsideration of a ruling when new evidence emerges. However, Judge Owens has so far found no grounds for reconsideration.
The deadlines were strict and clearly defined: FTX required customers to begin verification by March 1, 2025, and complete it by June 1, 2025. Both deadlines closed at 4:00 PM Eastern Time. The FTX Recovery Trust, which manages the exchange's assets, already opposed Chen's motion on July 16, emphasizing that similar requests have been denied in the past.
Chen is not the only one facing this issue. For example, D1 Ventures has been trying to recover $251,000 in USDC and USDT since December 2022, but its account also failed verification. The hearing on this case has been postponed indefinitely, and two other lawsuits remain open. Notably, Ernst & Young has already filed its final fee application—a clear sign that the process is moving toward its conclusion.
Why a Missed KYC Could Cost a Creditor Everything
Verification is a mandatory condition for receiving payouts. Creditors must pass a "know your customer" (KYC) check, submit tax forms, and register on BitGo, Kraken, or Payoneer. Miss even one step—and the money will pass you by. According to the Trust, hundreds of thousands of customer claims were rejected precisely because of failed verification checks.
The difference between those who made it in time and those who were late is enormous. Those who timely completed their paperwork received 100% of their claims, and some categories even received more:
- Simplified procedure claims: 120% returned
- U.S. customer claims: 100%
- General unsecured claims: 100%
- Dotcom customer claims: 96%
These amounts reflect distributions up to the fourth round of returns, which took place on March 31 and totaled approximately $2.2 billion. Then, on July 31, an additional roughly $900 million was distributed—the smallest FTX payout to date. Some funds remain locked for disputed claims, and the trust is seeking to reduce the reserve by $600 million—from $2.4 billion to $1.8 billion.
Judge Owens' decision matters not only to Chen. Any claimant who has yet to receive payouts due to documentation issues will be looking for an opportunity here. Sam Bankman-Fried, FTX's founder, is no longer involved in these proceedings—his 25-year sentence was upheld in June, and the appeal has definitively closed his case.
The hearing will take place on Wednesday at 9:30 AM Eastern Time via Zoom. Owens will rule immediately. Her response will signal to all latecomers whether any chance remains for them.
My take: This situation is a harsh lesson for the entire industry. Strict KYC deadlines are not a bureaucratic whim but a necessary measure to protect assets and comply with regulatory standards. However, for thousands of small creditors who missed the deadlines for various reasons, this could mean the loss of funds, and the court's decision will set a precedent determining how flexible the process can be in such cases.