The bankruptcy case of the FTX exchange, which has become one of the most high-profile in the history of the cryptocurrency industry, is approaching its final act. Only one disputed issue remains on the court's agenda, which will be considered this Wednesday, August 19. This is the last obstacle to the full completion of the multi-year bankruptcy process.
Chief Judge Karen B. Owens will consider a motion from a client named Daicho Chen, who missed the verification deadline and is now asking for a second chance. Chen filed the petition on March 27, citing the Federal Rules of Civil Procedure, which allow for a decision to be reconsidered when new evidence emerges. However, the judge does not yet see grounds for such a reconsideration.
Why the missed KYC became fatal
The key point that divided FTX creditors into those who received their funds and those who were left with nothing is compliance with verification procedures. The FTX Recovery Trust, which manages the exchange's estate, set strict deadlines: verification to begin by March 1, 2025, and to be completed by June 1. Both deadlines have already passed, and now every missed step means losing the right to recover funds.
The Trust has already opposed such motions, including Chen's request. This is not an isolated case: D1 Ventures has been trying to recover $251,000 in USDC and USDT since December 2022, but their account also failed verification. The hearing on this case has been postponed, and it is not yet known when it will take place. Two more lawsuits also remain open.
It is important to understand: verification is not a formality. Creditors are required to undergo KYC checks, fill out tax forms, and register on BitGo, Kraken, or Payoneer. Missing any of these steps automatically disqualifies you from payment. According to the Trust, hundreds of thousands of claims were rejected precisely for this reason.
Scale of payouts and reserves
Meanwhile, those who made it in time have already received their money. Payouts reached up to 120% for claims under the simplified procedure, 100% for US clients and holders of general unsecured claims, and 96% for Dotcom clients. The fourth round of payouts took place on March 31 and amounted to approximately $2.2 billion, and on July 31 another approximately $900 million was distributed — the smallest payout in the history of the process.
However, part of the funds remains reserved for disputed claims. The Trust is seeking to reduce the reserve by $600 million — from $2.4 billion to $1.8 billion. This is another sign that the process is nearing completion, and lawyers are already presenting orders without hearings.
Sam Bankman-Fried, the founder of FTX, is not involved in these proceedings. His sentence — 25 years in prison — was upheld in June, and the appellate mandate issued in August finally closed his case in the Second Circuit.
The hearing will begin at 9:30 a.m. Eastern Time via Zoom, and Judge Owens will issue her ruling immediately. Her verdict will serve as a signal to all late creditors: whether any chance remains for them.
My analysis: This case highlights the critical importance of complying with procedures in crypto exchange bankruptcy processes. For investors, this is a harsh lesson: even with full fund recovery, bureaucratic mistakes can cost everything. In the future, when working with any platforms, it is worth checking all KYC and AML requirements in advance to avoid being among those left behind.