Chinese FTX Users Face Sharp Losses Under New Claims Policy

Arabian Post

2 days ago

Court filings in the Chapter 11 case for collapsed exchange FTX suggest that users in 49 jurisdictions may see their claims disputed or denied over local crypto restrictions. A filing submitted on 2 July to the Delaware bankruptcy court outlines a new 'hold‑and‑review' process, halting distributions to users in areas with bans on crypto trading or restrictions on offshore platforms.
FTX's trustee, along with legal counsel, will evaluate whether paying out creditors in these jurisdictions violates local laws. Notices will then be issued to affected users, granting them at least 45 days to challenge their classification. Absent a timely response, claims and any accrued interest will be forfeited to the estate.
Although users in these 49 jurisdictions represent just 5% of approved claims, the financial exposure is heavily weighted. Over 82% of that total value originates from mainland China. China accounts for the vast majority of claims in what FTX labels 'potentially restricted jurisdictions'. Advocates warn that most Chinese claimants may not recover any funds.
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FTX's court motion says it will seek legal opinions for each jurisdiction before approving any payout. If counsel concludes local law prohibits the disbursement, those claims will be formally challenged. The legal framework treats such claims as 'disputed,' pending approval or denial of their status. Distributions will be suspended until those claims are resolved.
Affected users must submit sworn statements confirming acceptance of US court jurisdiction to pursue objections. Upon objection, the trustee will petition the court to determine if exclusion is justified. Lack of objection will result in automatic forfeiture.
The list of 49 jurisdictions includes not only China, but also countries such as Nigeria, Russia, Egypt, Saudi Arabia, Andorra, Fiji and Zimbabwe. That breadth reflects the wide global footprint of FTX prior to its collapse.
Chinese users have responded with alarm, exploring legal avenues in the US. One affected claimant, identified as 'Will,' told media that though the crypto ban in mainland China prevents trading, holdings remain legal and ownership rights should entitle them to fiat reimbursement in US dollars. He has engaged a New York attorney to counter FTX's position on wire transfers and jurisdictional exclusion.
Some creditors are studying whether to transfer or sell their claims through entities in compliant jurisdictions, though it remains unclear whether such mechanisms will resolve legal barriers.
FTX Recovery Trust reported an overall decline in disputed claims—from US $6.5 billion to US $4.6 billion—after approving $1.8 billion in claims and expecting another $2.7 billion to be cleared. Approved claim distributions have reached approximately $8.3 billion. This new policy specifically targets the subset linked to restricted jurs, leaving billions in limbo.
Legal experts suggest the court's decision could set precedent for how bankruptcy courts manage cross‑border crypto claims when local compliance is at risk. FTX is therefore seeking judicial approval to formalise this tailored procedure.
Critics argue the move undermines proportional equity. Victims from major markets like China, Nigeria and Egypt, who collectively hold substantial unrationalised stakes, now face potential complete exclusion. These developments raise concerns about transparency and fairness in the global recovery process.
FTX's reorganisation plan approved in October 2024 allows repayment of up to US $16.5 billion to customers. It prioritises accounts holding US $50,000 or less under the terms of the Chapter 11 order, but regional legal hurdles may override the general scheme.
Trustee Sunil Kavuri summarised that each claim will proceed only with a supportive local legal opinion. If the opinion concludes a payout contravenes domestic laws, the claim will be formally disputed and may be permanently disallowed.