Creditors from China contest FTX's attempt to impede payments worth billions of dollars
In a recent development, FTX creditors from various countries, including China, are facing uncertainty over their payouts under the exchange's bankruptcy plan. The FTX Recovery Trust has proposed to treat claims from these specific jurisdictions as "disputed," pending legal opinions that ensure payouts can be made without violating local or U.S. laws [2][3][1].
The proposed approach primarily targets countries where cryptocurrency trading is restricted or FTX lacked proper operational licenses, with the aim of avoiding regulatory and compliance risks. These regions include China, Russia, Morocco, North Korea, and 45 others [2][3][4]. Creditors from these countries have been given a 45-day period to contest their jurisdiction’s restricted status. If they do not object within this window, they will forfeit their rights to any potential distributions [2][3][4].
To contest, creditors must submit affidavits accepting the jurisdiction of U.S. courts, a process that can be costly and complex [2][4]. However, Chinese creditors, among others, are already mounting legal challenges, arguing that Chinese law allows for the possession of cryptocurrencies and foreign currency holdings [4][3].
Ji, who represents 300 other creditors in opposition to the exchange's proposal to restrict payouts to users in 49 jurisdictions, is urging the court to reject any designation that would exclude Chinese creditors from receiving their share under the bankruptcy plan [5]. Ji claims that there is no credible legal basis to conclude that distributions to Chinese creditors would subject the Trust to regulatory or criminal risk [1].
Notably, Ji cites the Celsius bankruptcy case, where Chinese users were paid in USD, as evidence that such distributions can be made without issue [1]. Furthermore, Ji argues that the inclusion of China in the list is both factually wrong and legally unsupported, as crypto ownership is considered legal in China [6].
It is important to note that Chinese residents can lawfully receive FTX payouts through standard channels, including wire transfers via Hong Kong-based accounts [7]. Hong Kong maintains a more favorable stance on crypto and supports regulated digital asset activity [7].
The FTX bankruptcy is approaching $1 billion in costs, ranking among the most expensive in history [8]. The motion is still under review ahead of a court hearing scheduled for July 22 [9]. Ji states that distributing funds to users in the region carries no regulatory or criminal implications [10]. The outcome of the ongoing legal proceedings will determine the ability of creditors in these 49 countries to receive their distributions.
- Despite the uncertainty surrounding payouts under the FTX bankruptcy plan, Ji, representing 300 other creditors, is urging the court to reject any designation that would exclude Chinese creditors from receiving their share.
- Ji claims that there is no credible legal basis to conclude that distributions to Chinese creditors would subject the Trust to regulatory or criminal risk.
- In the Celsius bankruptcy case, Chinese users were paid in USD, providing evidence that such distributions can be made without issue, according to Ji.
- On the contrary, Ji argues that the inclusion of China in the list of jurisdictions with restricted status is both factually wrong and legally unsupported, given that crypto ownership is considered legal in China.
- Chinese residents can lawfully receive FTX payouts through standard channels, including wire transfers via Hong Kong-based accounts, as Hong Kong maintains a more favorable stance on crypto and supports regulated digital asset activity.
