FTX Halts 82% Creditor Claims in 50 Jurisdictions Pending Legal Review

FTX, currently undergoing bankruptcy proceedings, has announced a temporary halt on processing creditor claims from users in China and 49 other restricted jurisdictions. This decision, effective as of July 2025, is pending legal confirmation that payouts comply with local laws. The affected regions, including China, account for approximately 82% of the total claims.

FTX, through its bankruptcy estate and recovery trust, has stated that it cannot release funds to customers in these markets until a legal analysis confirms that payouts would not violate local law. This legal complication was highlighted by creditor advocate, who noted that FTX is cautious about releasing funds without legal assurances.

Market analysts predict that this situation could lead to a prolonged halt in claim processing for affected regions, raising concerns about potential losses for creditors. Historically, similar legal and logistical hurdles have been encountered in cases such as those in China Hong Kong. FTX's decision introduces uncertainty for users holding various cryptocurrencies, including BTC, ETH, and altcoins, during the ongoing recovery efforts.

Global users now face uncertainty in asset recoveries due to this decision by FTX. This move could provoke new legal interpretations and significantly influence user claim prospects and market outcomes. FTX maintains communication with users through legal filings and official notifications as deliberations continue.

The FTX Recovery Trust has informed the Delaware bankruptcy court of this measure, which affects a substantial portion of the total claims. The trust's filing with the court outlines a detailed framework for handling these disputed claims. Once the court approves the procedure, the trust will send a "Restricted Jurisdiction Notice" to all creditors in the affected countries. This notice will explain the reasons for the designation and set a deadline of at least 45 days for creditors to object. During this period, all distributions related to the challenged claims will be suspended. If the dispute remains unresolved by the distribution record date, the withheld amount and any accrued interest will revert to the estate.

Creditors who wish to object must submit a sworn statement accepting the jurisdiction of the US court. The trust will then seek a court ruling on the reasonableness of its determination of restricted jurisdiction. Failure to object within the specified deadline will result in an automatic forfeiture of the claim. The trust considers the service of notice complete once mail or email reaches the last address on file, deeming this effort "commercially reasonable."

The trust's strategy involves obtaining legal opinions on each jurisdiction, distributing funds where feasible, and formally disputing claims when residence in a blocked market is confirmed. Claims will remain disputed until the status of the potentially restricted foreign jurisdiction is resolved and the claim is either allowed or disallowed. This development underscores the complexities involved in resolving claims from regions with stringent cryptocurrency regulations. The trust's approach aims to balance the need for legal compliance with the fair distribution of assets to creditors. The temporary halt on payouts is a precautionary measure to ensure that all legal requirements are met before funds are distributed, thereby minimizing potential disputes and legal challenges in the future.