FTX Recovery Trust Freezes 82% of Claim Value in 49 Jurisdictions

The FTX Recovery Trust has taken a significant step in its efforts to settle claims related to the collapsed crypto exchange. In a filing to the Delaware bankruptcy court on July 2, 2025, the Trust announced that it will treat claims from 49 foreign jurisdictions as “disputed.” This decision comes amid concerns that releasing funds to customers in these regions could violate local laws, particularly in countries where crypto trading or the use of distribution agents is prohibited.

The freeze affects creditor payouts from various countries, including China, Zimbabwe, Nigeria, Andorra, and Fiji. The Trust stated that it must conduct a detailed legal review before proceeding with any disbursement to ensure it doesn’t breach regulatory boundaries in these jurisdictions. These regions have been designated as “Potentially Restricted Foreign Jurisdictions,” and until the legal situation becomes clear, any claims from these locations will remain frozen and classified as “Disputed Claims.”

The FTX Recovery Trust plans to implement a hold-and-review system. Once the court approves the process, each affected creditor will receive a Restricted Jurisdiction Notice via their registered email or postal address. This notice will outline the reason for the dispute, list the jurisdiction involved, and provide an objection deadline of at least 45 days. To challenge the designation, creditors must submit a sworn statement agreeing to the jurisdiction of the US court. While the objection is under review, all associated payouts will be suspended. If unresolved by the record date, the funds and any retained interest will revert back to the estate.

The Trust warns that if a creditor fails to object within the given time or loses the court battle, their claim will be automatically forfeited, meaning the creditor permanently loses access to their funds. The Trust considers the delivery of notice complete once an email or letter reaches the last known contact on file, describing this as “commercially reasonable.”

Despite making up just 5% of total creditor claims, these 49 countries account for a disproportionate 82% of the claim value, with the majority concentrated in China. This makes China the most heavily affected country under the current restrictions. The Trust’s strategy, as summarized by a leading advocate, is to obtain opinions on each country and disburse legal and disruption tied to restricted regions.

As outlined in the filing, claims will remain marked as disputed until the Trust completes a jurisdiction-specific legal review, the region is deemed legally permissible for payouts, and the claim is either approved or denied officially. The Trust has made it clear that protecting the estate from risks is its priority, even if that means lengthy delays or losses for creditors in restricted countries.

The Trust is encountering significant challenges in managing claims from creditors across 49 jurisdictions. The primary hurdle stems from legal barriers in these regions, which either prohibit cryptocurrency trading or lack proper licensing for FTX's operations. Creditors from China account for 82% of the disputed claims, despite constituting only 5% of the total allowed claims in these territories. This discrepancy highlights the complexity of the recovery process, as the Trust seeks to navigate the legal intricacies of each jurisdiction.

The Trust has proposed a framework where affected creditors will receive a 45-day notice period to object to their jurisdiction’s restricted status. Those who fail to respond within this deadline will forfeit their distribution rights entirely. This move is aimed at ensuring compliance with local laws and mitigating risks associated with disputed claims. However, it also poses a significant challenge for individual creditors who may lack the legal resources to navigate this process.

Chinese creditors, in particular, are mobilizing legal challenges against the restricted jurisdiction designation. They argue that while mainland China does not support cryptocurrency trading, residents are allowed to hold digital assets, and the law recognizes the commodity attributes of virtual currencies. This legal nuance adds another layer of complexity to the recovery process, as creditors seek to demonstrate their legal standing through sworn affidavits and subject themselves to the jurisdiction of U.S. courts.

The ongoing distribution challenges further complicate the recovery process. FTX has distributed $6.2 billion across two major payment rounds, with the latest $5 billion distribution reaching eligible creditors in May 2025. However, creditors in restricted territories remain excluded from these distribution channels, creating a sense of uncertainty and frustration among those awaiting payouts.

The Trust's approach to managing claims from restricted jurisdictions is not without controversy. Critics argue that the process requires significant legal resources that many individual creditors cannot afford, potentially leading to delays or elimination of payouts for thousands of creditors. The development threatens to prolong the recovery process, which has already spanned over two years since FTX’s collapse in November 2022.

In response to these challenges, the Trust must file sworn statements waiving service of process and submitting to court jurisdiction for any objections. This legal maneuver is aimed at ensuring that the recovery process adheres to the highest standards of compliance and transparency. However, it also underscores the complexity of the task at hand, as the Trust seeks to balance the interests of creditors with the legal requirements of each jurisdiction.

The FTX Recovery Trust's efforts to manage claims from 49 jurisdictions highlight the challenges of navigating the legal landscape of cryptocurrency. As the Trust continues to seek court approval for its proposed framework, it remains to be seen how these disputes will be resolved and what impact they will have on the recovery process. The outcome of these legal battles will be crucial in determining the future of FTX and its creditors, as they seek to recover from the collapse of the crypto exchange.