Legal Dispute Emerges Over FTX Repayment Halt in Restricted Countries
A legal challenge has surfaced in the ongoing FTX bankruptcy proceedings, as a creditor with ties to China has formally objected to a recent motion that would pause repayments to residents of certain jurisdictions with restrictive cryptocurrency laws.
The objection, filed in U.S. Bankruptcy Court in Delaware, argues that halting payouts based on nationality rather than residency is both arbitrary and unjust. The creditor, Weiwei Ji, emphasized that despite living in Singapore, they were categorized as a Chinese creditor solely based on passport origin.
Ji filed the objection on behalf of over 300 Chinese claimants, collectively representing millions of dollars in verified claims against FTX.
Motion Seeks to Pause Repayments in 49 Jurisdictions
The FTX Estate filed the motion on July 2, aiming to suspend distributions to creditors in 49 countries, citing legal risks tied to local restrictions on cryptocurrency activity. The estate warned that proceeding with payments in such jurisdictions could result in fines, regulatory penalties, or even criminal charges.
The motion specifically mentions countries including China, Russia, Egypt, Ukraine, Afghanistan, Tunisia, Zimbabwe, and Moldova, each flagged for unclear or restrictive crypto regulations.
One example highlighted was Moldova, where providing services related to virtual assets can be considered a criminal offense.
Creditors Cite Legal Property Rights and Procedural Compliance
In the objection, Ji argued that cryptocurrency is considered legal personal property under Chinese law, and that repayments are being made in U.S. dollars, not digital tokens. This, Ji said, should eliminate concerns about violating local crypto laws.
Ji further stated: “My family holds four KYC-verified accounts with claims exceeding $15 million USD. We have fully complied with every procedural requirement under the Plan. The proposed motion jeopardizes our right to distribution in an arbitrary and inequitable manner.”
Controversy Grows Over FTX Repayment Policies
FTX began making initial repayments on February 18, starting with convenience class creditors. However, the valuation of crypto assets based on November 2022 prices, rather than current market value, has already drawn criticism from many stakeholders.
Now, with 5% of total claims tied to creditors in restricted jurisdictions, the potential pause could significantly delay repayments for thousands of users — further complicating the high-profile bankruptcy case.
Disclaimer
This content is for informational purposes only and does not constitute financial, investment, or legal advice. Cryptocurrency trading involves risk and may result in financial loss.