FTX Proposes New Claims Process Impacting 49 Jurisdictions

FTX, the bankrupt cryptocurrency exchange, has submitted a new proposal to the court seeking approval for a revised claims process. This process could significantly impact creditors from 49 jurisdictions where cryptocurrency is either banned or subject to legal restrictions. The proposal aims to address claims from these regions, which include countries where cryptocurrency trading is not permitted or where distributors are not allowed.

The move comes as the recovery estate continues to process distributions to customers affected by the November 2022 crash. Over 82% of the disputed claim value reportedly comes from users in China, with other affected countries including Russia, Egypt, Morocco, North Korea, and 44 more. Under the proposed plan, claims from these jurisdictions would be automatically treated as disputed unless FTX receives legal advice confirming that payouts are legally allowed. If the advice is negative, claims may be permanently denied, and the associated funds forfeited.

FTX has stated that it will notify affected users via email or mail, providing them with at least 45 days to object. To do so, users must submit a sworn statement and waive service of process, agreeing to the jurisdiction of the U.S. bankruptcy court. If no objections are made by the deadline, or if an objection is resolved against the creditor, the jurisdiction may be officially designated as “restricted.” At that point, any associated claim distributions, including interest, would be forfeited and returned to the FTX Recovery Trust.

Even for allowed claims, final payouts depend on whether the creditor can meet pre-distribution requirements and open an account with a court-approved distribution provider. If the jurisdiction is still restricted on the distribution date, the payout will not be made. While the filing states that FTX will hire local lawyers to assess the legality of distributions in each region and continue efforts to reduce the number of restricted jurisdictions, the proposal has already drawn criticism from many creditors.

Several creditors have expressed dissatisfaction with the latest update, arguing that the proposal is unjust. On social media, users have called the process “deeply discriminatory and procedurally unjust,” claiming that many creditors are being excluded based solely on nationality. One user urged FTX’s recovery team and legal partners to establish a fair re-review process, stating, “We are not passive victims, nor silent bystanders.” Another commenter called the plan “fraudulent,” warning that collective action from excluded victims could bring “serious consequences” for the recovery team if the current plan proceeds.

The latest proposal is still pending and will require approval from the bankruptcy court before it can be enforced. The FTX scandal centers on the dramatic collapse of one of the world’s largest cryptocurrency exchanges in November 2022. Founded by Sam Bankman-Fried, FTX misused billions of dollars in customer funds to cover losses at its sister trading firm, Alameda Research. The company filed for bankruptcy, leaving over a million creditors in limbo. Bankman-Fried was later convicted on multiple counts of fraud and conspiracy, marking one of the most high-profile financial crimes in recent history and shaking trust in the crypto industry.