FTX Recovery Trust Suspends Creditor Payments in 49 Jurisdictions Due to Local Laws

FTX Recovery Trust has announced the suspension of creditor payments in 49 jurisdictions due to local legislation that restricts cryptocurrency trading or the operation of third-party distributors. This decision, filed on July 2 with the Delaware bankruptcy court, affects regions such as China, Russia, and Pakistan, where legal uncertainties complicate the distribution of funds. Creditors in these areas face the risk of losing their claims if they do not comply with the legal requirements.

The filing indicates that local laws in these 49 jurisdictions prohibit crypto trading or limit the activities of third-party distributors, making legal payments impossible. These claims, considered disputed, will remain pending until the jurisdictions are recognized as compliant. The trust estimates that these regions account for 5% of the total claims, valued at $16 billion, with 82% of the restricted value linked to China.

Creditors in the affected countries will receive a Restricted Jurisdiction Notice explaining the reasons for the hold and providing a 45-day window to object. Failure to contest the designation by filing a sworn statement accepting the jurisdiction of a U.S. court will result in automatic forfeiture of claims. Unclaimed or disputed funds will be returned to the trust for redistribution.

The trust plans to engage local legal professionals to assess the feasibility of payouts. A court hearing scheduled for July 22 will decide whether the proposed framework will proceed. If approved, the trust will notify creditors to address objections and continue processing claims globally.

The suspension has caused frustration among creditors, particularly in China, where a significant portion of the restricted claims are based. The trust's process requires creditors to navigate complex legal hurdles, such as filing affidavits and agreeing to U.S. court supervision, which can be costly and inaccessible for many. Some creditors are exploring alternative solutions, such as assigning claims to companies in recognized jurisdictions, but these efforts are not always successful.

Since February 2025, the FTX Recovery Trust has distributed $6.2 billion in two installments, including $5 billion in May. The partnership with Payoneer has expanded the number of jurisdictions to 93, but the 49 restricted jurisdictions remain excluded. Creditors in these regions face delays or the risk of losing their money, which is part of the aftermath of the FTX collapse in 2022.

The once $32 billion exchange filed for bankruptcy in November 2022 following fraud allegations against former CEO Sam Bankman-Fried, who was sentenced to a 25-year prison term. Recovery efforts by the trust, including the sale of investments such as Anthropic, have enabled partial repayments, but the restricted jurisdictions complicate the process.

The trust continues to seek legal clarification to reduce the number of prohibited jurisdictions. The upcoming court hearing will determine the next steps in this complex bankruptcy case, which is eagerly awaited by creditors.