Quick overview

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FTX is asking the court to approve a plan that might prevent users in 49 countries where cryptocurrency is illegal from receiving billions in creditor repayments.

Chinese users are reportedly responsible for 82% of the impacted claim value and may be disproportionately affected. In a court filing dated July 2, FTX proposed designating 49 nations as “Potentially Restricted Jurisdictions,” including China, Russia, Afghanistan, and Ukraine.

The FTX Trust will first seek legal opinions for each jurisdiction, and payouts will proceed if deemed legally permissible, even though claims from these regions will automatically be marked as “disputed.”

However, the Trust will formally notify affected creditors if legal advice indicates that disbursing funds would be in violation of local laws. Following this, impacted users will have forty-five days to submit a formal objection, which can include a challenge in a U.S. court.

Those affected by the proposal have reacted strongly. Some argue that it raises serious ethical concerns, despite the FTX Recovery Trust framing it as a legal compliance issue. One user on X commented, “FTX accepted users from China when things were fine.” Now, it seems unfair to completely dismiss their claims due to “restricted jurisdiction.”

He referred to creditors in the affected nations as “victims” who still need payment. “While mainland China does not support cryptocurrency trading, residents… are allowed to hold cryptocurrencies… The claims process uses USD for settlement… they are allowed to hold USD overseas,” stated another Chinese claimant who goes by the username “Will.”

Others felt despair; one user asked, “Is there anything that could be done? Or did they steal all of the money?” Sunil, an advocate for FTX creditors, questioned why wire transfer settlements are not supported.