FTX Seeks Court Approval to Reimburse 15,000 Creditors in 49 Restricted Jurisdictions

FTX, the defunct crypto exchange, has requested authorization from the bankruptcy court to establish a structured procedure for handling creditors from 49 jurisdictions that restrict crypto activities. This move is aimed at determining whether to reimburse users in these regions in compliance with both U.S. and foreign financial laws. The process involves seeking legal opinions to navigate the complexities of international financial regulations.

According to FTX creditor activist Sunil, these developments affect over 15,000 claims, representing approximately 5% of the total filed claims. However, the value at stake is significantly higher, with Chinese users dominating over 82% of the disputed funds. This is despite China's ban on crypto trading, which has led many residents to use offshore exchanges like FTX.

FTX is prioritizing legal advice to determine the feasibility of reimbursing users in these restricted jurisdictions. The firm seeks country-specific legal opinions to ensure that any reimbursement does not violate international and local laws. If legal opinions suggest no violation, FTX will proceed with processing these claims. However, if permissible counsel confirms that distribution to some nations is unlawful, FTX will have three options: formally disputing the claim, filing an objection with the court, or having claimants forfeit their rights to distribution under the insolvency plan.

The massive role of creditors from China has raised significant concerns. Most residents utilized offshore exchanges like FTX after the country suspended crypto mining and trading in 2021. Now, these users claim over 82% of the value linked to potentially restricted distributions. FTX emphasizes navigating international financial policies to avoid excluding any victim, but uncertainty dominates among Chinese and other users in similar countries as they fear missing out on the recovery.

FTX has revealed a bold process and timeline for handling these claims. It will start identifying users in restricted countries after obtaining legal opinions. The exchange will update affected users and allow them to respond. The court’s final decision will be crucial for unresolved objections. Meanwhile, users who fail to prove their legitimacy or don’t contest the complaint risk losing their claims. While cautious, this structured approach reflects FTX’s dedication to regulatory compliance despite multiple users globally remaining in limbo.