FTX's proposed plan targets claimants from 49 restricted regions with legal checks before honoring repayments.
Chinese users make up 82% of restricted claims and face major payout barriers under China's crypto laws.
Some Chinese creditors are preparing legal challenges, citing rights to hold digital assets and USD overseas.
Bankrupt cryptocurrency exchange FTX has asked a U.S. bankruptcy court to approve a new process to manage creditor claims from 49 regions under tight crypto restrictions, including mainland China. These areas face either outright bans or severe legal limitations on cryptocurrency activity, complicating the claims process for affected users.
Despite users from restricted jurisdictions accounting for only 5% of total allowed claims, Chinese users represent 82% of that segment. With China maintaining a strict ban on cryptocurrency trading since 2021, these users may be unable to receive funds unless local laws allow it. FTX has stated it will only honor claims where legal counsel confirms payouts are permissible under relevant national laws.
Legal Opinions to Guide Payouts
FTX has committed to seeking legal opinions for each restricted jurisdiction to determine whether funds can be distributed legally. If it is confirmed that payments cannot be made under a region’s laws, those claims may be challenged or formally disputed. Users unwilling or unable to move their claim to a permitted region may lose their right to any repayment.
In response, affected users from China are beginning to explore legal options. A creditor named Will posted online that he had contacted legal representation in New York and intends to challenge the proposed restrictions. He pointed out that while China bans trading, individuals are still allowed to hold cryptocurrencies, which he believes should protect their right to receive USD-based settlements.
Settlement Logistics Raise Questions
Chinese claimants have also raised concerns about the lack of international wire transfer support, questioning why FTX will not process payments even though mainland residents are permitted to hold U.S. dollars abroad. FTX has not publicly addressed this logistical issue in detail.
According to creditor Sunil, users in blocked regions could potentially transfer or sell their claims to others based in permitted jurisdictions. While this option may offer a way forward for some, it remains uncertain how many will pursue this route, especially with legal challenges now emerging.
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