FTX Recovery Trust Restricts Payouts in 49 Jurisdictions, Impacting $825 Million in Claims

FTX Recovery Trust has implemented payout restrictions in 49 jurisdictions, significantly impacting creditors, particularly those in China. This move is part of a broader effort to ensure compliance with local laws and regulations, which has led to creditors in these regions being required to sell or assign their claims to eligible jurisdictions. The restrictions primarily affect users in China, Nigeria, and Russia, where legal compliance takes precedence over payout scheduling. Creditors in these regions may need to navigate complex legal processes to recover their funds, as the trustee has the final say on claim eligibility.

With claims worth around $800 million, 82% of which originate from Chinese users, the impact of these restrictions is substantial. The Trust manages a $16.5 billion recovery plan, executing payouts in fiat currency rather than cryptocurrency. This approach aims to stabilize the process and mitigate the risks associated with cryptocurrency volatility. The decision to use fiat currency aligns with historical precedents, such as the Mt. Gox bankruptcy, where affected parties often sold their claims due to restrictive laws.

The broader impact on on-chain assets like BTC or ETH is minimal, though the status of FTT remains inactive. Regulatory enforcement underpins FTX's actions, ensuring that payouts align with legal and compliance challenges. Creditors are rallying for transparency as they navigate the complexities of the recovery process. Historical precedents suggest that these restrictions may lead to large-scale liquidations, pushing credit holders to engage with third parties. This underscores the importance of regulatory compliance in the evolving landscape of cryptocurrency.

FTX's case may set regulatory standards for jurisdictions globally, highlighting a focus on legality over direct transactions. The Trust has proposed a new claims process for users from 49 jurisdictions where cryptocurrency is restricted. This move comes as the FTX bankruptcy estate has raised concerns over payouts to creditors in countries with ambiguous or restrictive cryptocurrency regulations. Creditors from these 49 restricted jurisdictions, including China and Russia, are at risk of losing their claim rights worth approximately $825 million. The proposed procedure by FTX Recovery Trust establishes that all claims from jurisdictions considered at risk will remain in a “contested” state until favorable legal opinions are obtained for the distribution of the amounts.

The stated goal is to mitigate compliance risks related to local regulations on crypto assets and ensure that FTX does not violate either U.S. laws or those of the countries involved. Interested creditors will receive 45 days’ notice to contest the status of their jurisdiction. In the event that they do not file formal objections within the specified period, they will automatically lose the right to the distribution of the sums. The mechanism requires that each creditor intending to contest the exclusion must produce an affidavit, agreeing to submit to the jurisdiction of the American courts. Such legal procedures involve significant costs and complexities, often not accessible to the average individual user.

Chinese creditors are already mobilizing through international legal actions to contest the inclusion of China among the countries with restricted jurisdiction. Their argument is based on a key point of local regulations: while not supporting cryptocurrency trading, Chinese law recognizes the right of citizens to hold digital assets in the private sphere, classifying Bitcoin and similar as “commodity-type goods”. From here, numerous users are entrusting U.S. law firms with the filing of objections at every procedural stage. Not only that: the issue of payments in USD is also raised, given that the reconciliation of credits occurs in U.S. dollars and Chinese citizens can, within certain limits, hold foreign currency abroad according to the current foreign exchange control regulations.

From February 2025, FTX has implemented two main distribution rounds of funds to creditors. The first, reserved for creditors with less than $50,000 exposure, saw the allocation of 1.2 billion dollars. The second round, intended for creditors with larger positions, took place in May 2025, with over 5 billion dollars disbursed. To ensure greater accessibility to the liquidation of credits, FTX has added Payoneer as the third official distribution platform, alongside BitGo and Kraken, allowing payment in 93 jurisdictions. However, users residing in restricted jurisdictions still do not have access to these distribution channels, remaining excluded from payments.

The restrictions imposed by the court and the FTX Recovery Trust threaten to further prolong the wait for thousands of creditors, many of whom have not received compensation since November 2022, the date of the FTX collapse. This scenario accentuates the problem of financial exclusion in regions where access to crypto represented an alternative way of safeguarding savings compared to traditional banking systems. The FTX case thus raises new questions about the repercussions of regulatory restrictions on Bitcoin and on the main digital assets in the emerging markets, where demand remains high but regulatory security is becoming increasingly uncertain.

In addition to the issue of jurisdictions considered at risk, the court has rejected the requests of Three Arrows Capital, deeming them unfounded and more related to failed trading strategies than to alleged irregular liquidations by FTX. The situation is made even more complex by the legal case of the former CEO Sam Bankman-Fried, currently imprisoned until December 2044 for fraud, and by the aftermath of civil lawsuits against celebrity endorsement. Some, like Shaquille O’Neal, have reached a settlement of 1.8 million dollars; others, including Tom Brady and Kevin O’Leary, are still at the center of ongoing proceedings. The current FTX affair and the issue of restricted jurisdictions project a scenario of great uncertainty for creditors dealing with the slow recovery of funds. Despite more than 6.2 billion dollars having already been disbursed, thousands of users risk being left without compensation due to the intertwining of local regulations, compliance, and procedural requirements. As a result, the outcome of this debate will strongly influence not only the upcoming distributions but also the way digital asset platforms like FTX and Bitcoin investors will relate to future regulatory developments at an international level. For those operating in high-risk countries, it remains essential to monitor every update and evaluate legal actions or defensive strategies to protect the right to recover their own assets.