The FTX bankruptcy case, which has become one of the most high-profile and complex in the history of the crypto industry, is nearing its conclusion. Only one unresolved dispute remains on the court's agenda, and it will determine whether some creditors can recover their funds. The hearing is scheduled for August 19, and its outcome will be a key signal for thousands of affected investors.
Chief Judge Karen B. Owens will consider a motion from plaintiff Daijoch Chen, who is asking for a second chance to complete KYC verification. Chen missed all established deadlines but claims he has valid reasons for reconsideration. He cites the Federal Rules of Civil Procedure, which allow for case reconsideration when new evidence emerges. However, the FTX Recovery Trust, which manages the exchange's assets, has already opposed the motion, calling it unfounded.
Why KYC Became a Sticking Point
Verification is not just a formality but a mandatory condition for receiving payouts. Creditors were required to complete "know your customer" checks, fill out tax forms, and register on one of the platforms for fund distribution, such as BitGo, Kraken, or Payoneer. The deadlines were strict: verification had to begin by March 1, 2025, and be completed by June 1. Both deadlines have already passed, and for those who missed them, the funds will likely be lost forever.
According to the Trust, hundreds of thousands of claims were rejected precisely due to non-compliance with these procedures. This is not an isolated case: for example, D1 Ventures has been trying to recover $251,000 in USDC and USDT since December 2022, but their account also failed verification. Similar lawsuits have already been postponed multiple times, and now the court must provide a final answer.
Scale of Payouts and Reserves
Huge sums are at stake. Those who managed to complete all the paperwork have already received significant compensation. Under the simplified procedure, the recovery rate was 120%, U.S. clients received 100%, and holders of general unsecured claims also received 100%. The fourth round of payouts, held on March 31, amounted to approximately $2.2 billion, and on July 31, another roughly $900 million was distributed—the minimum payout to date.
However, a portion of the funds remains locked for disputed claims. The Trust is seeking to reduce the reserve by $600 million—from $2.4 billion to $1.8 billion. If the court approves this, the freed-up funds will be directed toward further payouts to bona fide creditors.
My View on the Situation
This final dispute is not just a legal formality. Judge Owens' decision will set a precedent for all those who missed the deadlines. On one hand, the strictness of the procedures protects the process from abuse, but on the other, it deprives those who may have faced technical failures or personal circumstances of a chance. In the world of cryptocurrencies, where anonymity is often valued more than convenience, such KYC requirements become a real barrier. Investors should learn a lesson: in bankruptcy proceedings, formalities decide everything, and delay here can truly cost a fortune.
The hearing will begin at 9:30 a.m. Eastern Time via Zoom, and a decision will be made immediately. The judge's response will let all latecomers know whether there is still hope for them.