FTX Seeks Halt on Creditor Payouts in 49 Jurisdictions Due to Restrictive Crypto Policies

FTX, the once prominent cryptocurrency exchange, has taken a significant step in its bankruptcy proceedings by seeking court approval to halt payouts to creditors in 49 jurisdictions. This move is part of the company's broader strategy to navigate the complex landscape of global crypto regulations. The FTX bankruptcy estate has filed a request with the US Bankruptcy Court for the District of Delaware, aiming to ensure compliance with local laws that restrict cryptocurrency trading or the operation of third-party distributors.

The 49 jurisdictions identified in the filing present significant challenges due to their restrictive crypto policies. These regions account for 5% of the total claims, valued at $16 billion, with a substantial portion of the restricted value linked to China. The FTX Recovery Trust has announced that distributions to creditors in these areas could pose legal and compliance risks, making it difficult to proceed with payments.

Creditors in the affected regions will receive a Restricted Jurisdiction Notice, which outlines the reasons for the suspension and provides a 45-day window to object. Failure to contest the designation by filing a sworn statement accepting the jurisdiction of a US court will result in automatic forfeiture of claims. Unclaimed or disputed funds will be returned to the trust for redistribution, adding to the complexity of the recovery process.

The trust plans to engage local legal professionals to assess the feasibility of payouts in these jurisdictions. 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. This decision 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 US court supervision, which can be costly and inaccessible for many.

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.