Among Korean victims of FTX, it is not uncommon for individuals to decide whether or not to file a proof of claim without fully understanding the legal effect of the filing or the subsequent procedures.

Once a proof of claim is filed, FTX as the debtor may raise an objection. In such cases, the creditor must submit a response within the deadline set by the court. If no response is filed, the amount, nature, and status of the claim will be determined according to FTX’s objection. Therefore, filing a proof of claim effectively initiates a significant legal procedure within Chapter 11.

The U.S. Bankruptcy Court also emphasized this point in its June 28, 2023 notice regarding the bar date for filing proofs of claim. In that notice, the Court explicitly stated in capital letters that creditors should consult an attorney when deciding whether or not to file:

“A HOLDER OF A POSSIBLE CLAIM AGAINST THE DEBTORS SHOULD CONSULT AN ATTORNEY REGARDING ANY MATTERS NOT COVERED BY THIS NOTICE, SUCH AS WHETHER THE HOLDER SHOULD FILE A PROOF OF CLAIM.”

Furthermore, if a creditor files a proof of claim that differs from what is listed in the debtor’s schedules of assets and liabilities (commonly referred to as the “schedules”), FTX is expected to object. In that event, Korean victims who filed a proof of claim will need to submit a response supported by persuasive evidence.

A. Yes, you are considered a creditor.

If you deposited digital assets or cash with FTX (FTX.com) but are unable to recover them, you qualify as a “creditor” under U.S. bankruptcy law in the FTX Chapter 11 proceedings. You hold a right to claim the return of the missing assets or cash. Once your status as a creditor is confirmed through the proof of claim process, you may exercise your rights in accordance with the procedure, including voting rights and participation in distributions.

A. As mentioned earlier, if you still have assets left with FTX, you are considered a creditor in the bankruptcy proceedings.

First, you need to confirm whether the U.S. Bankruptcy Court recognizes you as a creditor. Throughout the process—particularly during the drafting of the reorganization plan—it is important to raise the necessary arguments. Exercising your voting rights, either in favor of or against the plan, is also a key step. In addition, you should prepare in advance to ensure that you can actually receive any distributions once payments are made under the reorganization plan.

If Korean victims respond collectively, they may be able to exert influence over the proceedings. In Chapter 11, the amount and timing of distributions are ultimately determined by the influence participants exercise throughout the process. By doing so, not only can you contribute meaningfully to the proceedings, but you can also help protect the interests of Korean creditors as a group.

A. For the following reasons, it is strongly recommended that you retain a U.S. attorney:

1. The U.S. Bankruptcy Court for the District of Delaware has warned: “The rules and laws governing bankruptcy are complicated and proceeding without legal advice can result in unintended financial and legal consequences.”

2. The official instructions for completing a proof of claim form also include the following guidance: “You should consider obtaining the advice of an attorney, especially if you are unfamiliar with the bankruptcy process and privacy regulations.”

3. The Official Committee of Unsecured Creditors in the FTX case advises non-native English speakers and foreign creditors to retain legal counsel: “If English is not your first language or you are a foreign creditor, we advise you to retain legal counsel to assist you through the process.”

4. All proceedings in the FTX bankruptcy case are conducted in English before a U.S. court. For foreign creditors who are not fluent in English, it can be difficult to fully understand the process and to communicate effectively with the court, the debtor, or the creditors’ committee. In addition, if there is a dispute over the amount of a claim, you will need a representative to advocate on your behalf.

5. If the U.S. Bankruptcy Court issues distribution checks, they are mailed directly to foreign creditors. This may cause administrative difficulties. By appointing a U.S. attorney, you can receive distributions safely through the attorney’s escrow account—recognized under the U.S. legal system—and then have the funds securely transferred to your bank account overseas.

A. The FTX Legal Clinic provides both one-stop legal services for Korean creditors and individual legal services.

1. One-Stop Legal Services for Korean Creditors

Who it’s for: Victims who deposited digital assets or cash with FTX (FTX.com) but cannot recover them.

What it includes: Comprehensive representation of Korean creditors throughout the entire FTX bankruptcy proceedings (Case No. 22-11068). This service consolidates all necessary legal support to collectively protect creditors’ interests and respond efficiently to complex procedures and legal issues. Importantly, it lowers the cost barrier that often prevents victims from retaining U.S. attorneys, thereby making professional legal assistance more accessible.

2. Individual Legal Services

Who it’s for: Victims who deposited digital assets or cash with FTX (FTX.com) but cannot recover them.

What it includes: For those who require services beyond the one-stop program, individual legal services are available. In particular, if the claim amount you believe you are owed differs from the amount listed in FTX’s published schedules, you will need to file a proof of claim and should apply for individual legal services.

A. In bankruptcy proceedings, recovery essentially means that the debtor’s total assets are distributed among all creditors.

If there are no assets, creditors may receive nothing. If sufficient assets exist, creditors may be paid in full. In past bankruptcy cases involving Korean cryptocurrency exchanges, many victims were unable to recover their deposits. However, the FTX bankruptcy is different in that there are assets available for recovery.

On January 11, 2023, it was reported that FTX had recovered approximately USD 5 billion in assets. Due to fluctuations in the value of digital assets and other factors, by mid-June 2023, FTX claims were trading on the secondary market at around 28% of face value.

Considering these facts and trends, creditors in the FTX case appear to have a relatively higher chance of recovering a meaningful portion of their claims—unlike previous crypto exchange bankruptcies in Korea. The exact payout, however, will only be determined once FTX’s assets have been fully identified and recovered, and the total amount of creditor claims has been finalized.

A. When Can Creditors Expect Repayment in Insolvency Proceedings?

There are various possibilities as to when creditors may receive repayment in insolvency proceedings.

The timing is closely tied to when the reorganization plan is approved by the court. This, in turn, depends on several factors such as the complexity of the case (number of creditors, diversity of claims, and disputed claims), the size of the debtor company, and how quickly the insolvency court and stakeholders resolve outstanding issues.

Although it is difficult to predict with certainty, if FTX conducted no significant business activities beyond crypto asset brokerage and has properly maintained transaction records, the process is expected to take around 3–5 years.

However, if recovering the debtor’s assets takes longer than anticipated, or if lengthy litigation is required to finalize claim amounts, approval of the reorganization plan could be significantly delayed.

Furthermore, even after court approval, repayment will not necessarily begin immediately. If the approved plan provides for repayments after a certain period of time, creditors will only be paid according to that schedule. This means actual repayment could occur later than the plan’s approval date.

For reference, in the case of Mt. Gox, which filed for insolvency in Japan in 2014, repayments to creditors are scheduled to begin in the fall of 2023. Of course, that case was governed by Japanese law and procedures, which differ from U.S. bankruptcy proceedings, and delays also arose from unexpected developments along the way.

A. Repayments Are Generally Made in Cash

In insolvency proceedings, courts typically assess all creditor claims in monetary terms and then confirm the total claim amount. Based on this, the reorganization plan—approved at a later stage—sets out the repayment percentages for each class of claims.

Accordingly, creditors are usually repaid in cash, in an amount equal to their claim multiplied by the repayment rate set forth in the plan.

That said, there is a possibility that repayment may be made, at least in part, with certain crypto assets held by FTX instead of converting all assets into cash. The specific repayment method will ultimately be determined in the approved reorganization plan.

A. The “Bar Date” is the deadline for filing a Proof of Claim.

In insolvency proceedings, the debtor (in this case, FTX) requests court approval of the process and deadline for creditors to submit Proofs of Claim. Once approved, the court sets the procedure and deadline, and the debtor sends a formal notice to creditors.

The Bar Date is essentially the last day on which a Proof of Claim can be filed.

If you believe you are owed money on claims arising before November 11, 2022, you should consider filing a Proof of Claim. Even if you did not receive a notice, you can find the relevant information on the website of FTX’s claims agent, Kroll: https://restructuring.ra.kroll.com/FTX.

(Source: Kroll)

A. The debtors and the Committee are currently exploring options for a potential restart of the exchange.

At present, however, the exchange has not resumed operations, nor is there a definitive plan for it to do so. A task force of experts from both the debtors’ and the Committee’s teams has been formed to evaluate the feasibility and potential benefits of restarting the platform.

For now, all discussions regarding a restart remain hypothetical. In compliance with its confidentiality obligations, the Committee will continue to provide creditors with updates on any material developments in these discussions.

(Source: Official Committee of Unsecured Creditors)

A. You can check whether your Proof of Claim has been received by visiting the website of the Claims Agent, Kroll Restructuring Administration LLC, at https://restructuring.ra.kroll.com/FTX/. Please note that your name may appear in a redacted form.

If, when filing your claim, you included your address and enclosed a self-addressed stamped envelope along with an extra copy of your Proof of Claim, the court will return a copy stamped “filed” in the envelope after the claim has been processed. Receiving this mailed copy serves as confirmation that the court has accepted your Proof of Claim.

(Source: Official Committee of Unsecured Creditors and prior Kroll information)

A. Yes, there are priority creditors.

Creditors holding coins or cash are classified as unsecured creditors. However, in insolvency proceedings, certain creditors have priority over unsecured creditors.

As a general rule, the order of repayment is as follows: secured creditors, administrative expense (priority) claims, priority unsecured creditors, general unsecured creditors, preferred shareholders, and common shareholders.

A. Official information about the FTX insolvency proceedings can be found from the following three sources:

1. U.S. Federal Bankruptcy Court – All filings submitted by the parties and the court’s rulings are available at https://ecf.deb.uscourts.gov/.

2. Official Committee of Unsecured Creditors of FTX Trading (commonly referred to as the “Creditors’ Committee”) – Updates on the proceedings and submitted documents can be found at https://dm.epiq11.com/case/ftx/info.

3. Kroll Restructuring Administration LLC – Appointed by the court as the claims and noticing agent for FTX, Kroll provides case information and access to filings at https://restructuring.ra.kroll.com/FTX/. As of June 21, 2023, a total of 1,678 court documents had been posted. (General Kroll site)

A. No. In addition to FTX Trading Ltd. (FTX.com), which was primarily used by customers in Korea, a total of 101 affiliated entities also filed for insolvency.

Chapter 11 proceedings are currently underway for 100 of these entities, with the exception of two.

(Source: Kroll)

A. All open derivative positions are currently under legal review by FTX, and the exact process for handling them will be announced at a later date.

(Source: Kroll)

A. You can update or correct your contact information by emailing FTXInfo@ra.kroll.com with your request for an address change or to be added to the creditor list.

Additional information about the FTX Chapter 11 proceedings, including court filings and claims details, can be found on the claims agent’s website: https://restructuring.ra.kroll.com/FTX. (Source: Kroll)

If you are receiving legal services from Advanced Legal P.C., you may also update your contact information by emailing contact@ftxlegalclinic.com.

A. A creditors’ meeting is an informational session organized by the U.S. Trustee and attended by representatives of the FTX debtors.

It is called a “creditors’ meeting” because creditors have the opportunity to attend and ask questions directly to the debtor. However, the Section 341 meeting is not a forum where claims or other rights are decided. Interested parties may attend, but attendance is not mandatory.

The first Section 341 meeting for the FTX debtors was held by telephone on December 20, 2022, at 10:00 a.m. (EST).

(Source: U.S. Bankruptcy Court & Kroll)

A. A Notice of Commencement is a standard legal document that provides official notice of the initiation of the FTX Chapter 11 cases.

It contains key details about the case, including the case number and the date of the first meeting of creditors. This notice was sent to all interested parties. No action is required from you in response to receiving it.

(Source: Kroll)

A. The Official Committee of Unsecured Creditors (often referred to as the “UCC” or the “Committee”) is a group of unsecured creditors appointed by the U.S. Trustee in a Chapter 11 bankruptcy case to represent the interests of all unsecured creditors.

(Source: Official Committee of Unsecured Creditors)

A. The role of the Committee is to act as a fiduciary for all general unsecured creditors, including the debtor’s customers (i.e., FTX customers).

The Committee’s general duties are set forth in Section 1103 of the Bankruptcy Code.

Together with its professionals, the Committee focuses on maximizing value for unsecured creditors in the Chapter 11 proceedings. This includes analyzing the debtors’ assets and liabilities, investigating various transactions that occurred before the bankruptcy filing, and identifying potential estate claims and causes of action.

The Committee also works with the debtors on the negotiation, formulation, and implementation of a Chapter 11 reorganization plan.

The Committee has retained Paul Hastings LLP and Young Conaway Stargatt & Taylor LLP as legal counsel, FTI Consulting, Inc. as financial advisor, and Jefferies LLC as investment banker.

(Source: Official Committee of Unsecured Creditors)

A. The debtors have stated that they are still in the process of locating and identifying assets and account information, as they attempt to reconstruct FTX’s incomplete books and records from before the petition date.

It is important to review the debtors’ schedules of assets and liabilities. If your claim is missing from the schedules or the amount listed differs from your records, you should take appropriate action—such as filing a Proof of Claim—to assert your rights.

(Source: Adapted from the Official Committee of Unsecured Creditors)

A. The Committee primarily provides updates through its website, UCCFTX.com, and its official Twitter account at https://twitter.com/FTX_Committee.

If you have questions or feedback, you may contact the Committee at FTXTradingUCCInfo@epiqglobal.com. However, the Committee generally does not respond to individual inquiries directly; instead, it addresses common questions by updating its FAQs and public communications.