FTX Repayment Blocked in 49 Regions Due to Crypto Restrictions

The FTX Recovery Trust has officially frozen creditor payouts in 49 jurisdictions where crypto activity is restricted or banned, citing the need for legal confirmation before proceeding. The move was disclosed in a July 2 court filing and primarily affects regions such as China, Nigeria, Fiji, Andorra, and Zimbabwe. 

While these jurisdictions account for only 5% of total allowed claims, a staggering 82% of the frozen value originates from China alone. Due to local laws in these regions, FTX is facing regulatory uncertainty over whether it can legally distribute funds to residents.

What Happens If Users Are From These Jurisdictions?

FTX has implemented a “hold-and-review” system where all claims from restricted countries are now classified as “disputed.” The Recovery Trust will only process these claims if legal advice confirms that distributions won’t violate local laws. Until then, no funds will be released to these users. Once the court signs off on the process, each impacted creditor will receive a “Restricted Jurisdiction Notice.” This document will detail why the creditor is affected and give them a deadline, at least 45 days, to object.

The situation has sparked debate among creditors, with some pointing out that users who have moved to crypto-friendly countries are still unable to access their claims. FTX Creditor advocate Sunil Kavuri said it might be possible to transfer or sell claims to entities in allowed jurisdictions, though it’s unclear if this is a guaranteed fix.

Creditors Retaliate

In response to FTX, Chinese FTX creditor Will的折腾纪 (@zhetengji) announced that he’s taking legal action after FTX froze payouts to users in countries like China. He’s already contacted his New York lawyer and plans to object at every stage. Will says the move is unfair because, even though crypto trading is restricted in China, people are still allowed to hold crypto and U.S. dollars overseas. Since FTX is settling claims in USD, he questions why wire transfers aren’t allowed. He’s urging other affected users not to stay silent and to join him in challenging the decision.

Disputed Claims Shrinking

In a positive update, FTX also updated its numbers, revealing that the total amount of disputed claims has dropped from $6.5 billion to $4.6 billion. Around $1.8 billion in previously disputed claims have been approved, and another $2.7 billion is expected to be allowed soon. So far, the total value of approved claims has reached $8.3 billion, offering some relief to creditors waiting for clarity.

Until resolved, all affected claims will remain disputed, leaving billions of dollars hanging in legal limbo.