FTX Faces Legal Challenge Over Exclusion of Chinese Creditors

FTX, the bankrupt cryptocurrency exchange, has proposed a plan to restrict payouts to creditors in 49 jurisdictions, including China, where cryptocurrency regulations are either unclear or strictly enforced. This proposal has sparked legal resistance from a group of Chinese creditors, who argue that the decision is both factually incorrect and legally unsupported.

On July 8, 2025, FTX creditor Weiwei Ji filed an objection in the Delaware Bankruptcy Court on behalf of 300 other creditors. The objection challenges the bankruptcy estate’s proposal to exclude creditors from certain regions from the ongoing distribution process. China, which accounts for more than 80% of the affected claim value, is one of the key regions under review, alongside other countries like Russia, Morocco, and North Korea.

Ji, a Chinese passport holder and tax resident of Singapore, contends that the inclusion of China in the list of restricted regions is unjustified. He argues that distributing funds to users in China carries no regulatory or criminal implications. According to Ji, FTX claims are denominated and settled in U.S. dollars, not cryptocurrency, and can be lawfully received by Chinese residents through standard channels, including wire transfers via Hong Kong-based accounts.

To bolster his case, Ji emphasized the legal status of cryptocurrency in China. While retail trading may be restricted, crypto ownership remains legal in the country. Courts have recognized assets like Bitcoin and Ethereum as personal property, as affirmed by a 2024 ruling by a Shanghai Court. Ji also pointed out that Hong Kong, which has a more favorable stance on cryptocurrency, operates under a separate legal framework and actively supports regulated digital asset activity.

Ji cited legal precedent, including the Celsius bankruptcy and the Mt. Gox rehabilitation, where Chinese users were paid in USD and received crypto payouts through Kraken, respectively. Neither case imposed restrictions based on jurisdiction, further supporting his argument that FTX's decision to exclude Chinese creditors is unjustified.

FTX’s motion remains under review ahead of a court hearing scheduled for July 22. Ji is urging the court to reject any designation that would exclude Chinese creditors from receiving their share under the bankruptcy plan. The legal challenge highlights the complexities and uncertainties surrounding cryptocurrency regulations in different regions, particularly in China, where the legal framework for digital assets remains ambiguous.

The dispute underscores the broader challenges faced by the cryptocurrency industry in navigating diverse regulatory landscapes. As digital assets gain traction globally, the lack of harmonized regulations creates hurdles for exchanges and users alike. The legal battle between FTX and its Chinese creditors serves as a reminder of the need for clearer and more consistent regulatory frameworks to ensure fairness and transparency in the cryptocurrency market. The outcome of this legal challenge could set a precedent for how similar disputes are handled in the future, potentially influencing the way exchanges operate and interact with creditors in different jurisdictions.