In a significant development for former FTX users, the FTX Recovery Trust has filed a motion outlining new procedures that may prevent payouts to creditors in 49 restricted foreign jurisdictions, including China, Russia, Pakistan, and Ukraine.
Creditor Claims at Risk in ‘Restricted Foreign Jurisdictions’
According to the filing made on Wednesday, the trust is seeking court approval to assess legal compliance in regions where regulatory, legal, or sanctions issues may block distribution of recovered assets. These areas are labeled “Restricted Foreign Jurisdictions.”
“Distributions that cannot be made due to the illegality of doing so under the laws of a Restricted Foreign Jurisdiction will not be made,” the filing states.
Approximately 5% of the total $16 billion in potential claims are tied to these restricted regions. Notably, China accounts for 82% of the claim value in these areas.
New Compliance Measures and Legal Review
If the motion is approved, the trust will hire local attorneys to assess whether crypto distributions can be made legally and securely in each of the 49 jurisdictions. Depending on the findings:
- If compliant, funds will be distributed via authorized payment providers.
- If not, the jurisdiction will be labeled officially restricted, and creditors may lose their claims.
Creditors will receive notice and have 45 days to file objections. If no valid objection is filed, or if objections are overruled, the payouts will be forfeited and returned to the trust for redistribution among eligible creditors elsewhere.
“Any interest in such Distribution shall revest in the FTX Recovery Trust,” the document adds.
Growing Concerns from Chinese Creditors
The announcement has triggered backlash online, especially from Chinese creditors. One user on X (formerly Twitter), @zhetengji, wrote:
“I will definitely take action and raise objections at every stage… This is absolutely unreasonable.”
What Comes Next?
A court hearing is scheduled for July 22 to review the proposed motion. If approved, the trust will:
- Notify affected users
- Engage legal reviews
- Resolve objections
- Continue the claim distribution process
Although Payoneer was recently added as a third distribution partner, many creditors are still unable to access payouts due to regional restrictions.
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.