Hearing tomorrow on the disputed FTX KYC deadline
Quick heads up for anyone following this.
On August 19 the court hears a claimant who missed the KYC deadline and is asking to be allowed in anyway. It reads like one person's problem, but it isn't really. Two things ride on it:
- whether creditors who never completed KYC are shut out permanently
- what happens to the reserves that fund the next distribution
Why this hearing matters even if you already got paid?
Distributions are funded partly by drawing down reserves. Reserves are money held back against liabilities that aren't settled yet. One of those unsettled liabilities is the chance the estate has to pay creditors who never completed KYC.
So:
- if he loses, non-KYC'd creditors are likely excluded for good, the liability goes away, and reserves can probably come down at the next distribution. Good for people getting paid.
- if he wins, it opens the door for everyone else in the same spot, and the reserves stay locked up.
Why so many people missed the KYC deadline, and what actually gets you an exception
Recoveries here have been good and most creditors got paid. A smaller group got nothing, because they didn't meet the eligibility requirements in time.
The main reason, from what I've seen, is that people had no idea how strict the deadlines were. There were two of them. One to start the process, one to finish it.
A lot of people in that position have reached out to us. It's almost always the same three things:
- an email nobody opened
- a notice that went to spam
- not believing FTX would ever actually pay out
One case was different. The claimant physically could not submit anything. Incarcerated, no internet, no contact with the outside. That's the only one I've seen where the judge granted relief.
Exceptions look reachable on serious grounds like illness or genuine impossibility.
We will see tomorrow how this will unfold!