Chinese FTX users, who represent a staggering 82% claims from the bankrupt crypto exchange, are at the risk of losing funds, due to the crypto ban in China. In order to settle this issue, the crypto exchange has requested the U.S. bankruptcy court to approve a new claims process for users from 49 “restricted jurisdictions.” According to the proposal, FTX would only honor claims from these regions if legal counsel confirms payouts are permissible under local law. If not, those claims may be disputed or outright denied.
FTX Seeks Court Approval for Claims in Restricted Regions
Bankrupt crypto exchange faces a major challenge ahead of handling users’ claims from 49 restricted jurisdictions, where there are strict crypto regulations or a crypto ban. While only 5% of total allowed claims come from these regions, a staggering 82% of these come only from the Chinese users. Since China banned crypto trading in 2021, the existing legal restrictions on cross-border payouts could leave Chinese claimants with nothing. In May, FTX kickstarted the second phase of creditor repayment, while distributing a total of $5 billion to users.
The exchange stated that it will seek legal opinions to determine whether distributions can be made to users in these jurisdictions. If legally permissible, FTX intends to proceed with payouts. However, if the claimant determines to stay within the restricted jurisdiction, there’s no legal pathway into this, and the claim can be formally disputed.
FTX will then file an objection in court, and unless the issue is resolved, those users risk forfeiting their right to receive any distribution, as reported by creditor Sunil, citing legal court documents.
Chinese Users Seek Legal Action
Chinese users have come forward to resolve this issue, stating that they would be seeking legal action on this matter. X platform user Will, who seems to be a creditor himself, wrote:
“I’ve already contacted my lawyer in New York and am waiting for her response. I will definitely take action and will raise objections at every stage. While mainland China does not support cryptocurrency trading, residents of mainland China are allowed to hold cryptocurrencies. The law recognizes the commodity attributes of virtual currencies”.
The user further questioned that while claims are being settled in U.S. dollars, why international wire transfers are not supported for mainland Chinese residents, despite the fact that they are legally permitted to hold USD overseas.
One user also inquired about the way out of this. Responding to this, FTX creditor Sunil wrote: “Unfortunately from the filing seems like they decide. Worse case can sell or transfer the claim as they collect in an allowed jurisdiction”.
Bhushan Akolkar
Bhushan is a seasoned crypto writer with over eight years of experience spanning more than 10,000 contributions across multiple platforms like CoinGape, CoinSpeaker, Bitcoinist, Crypto News Flash, and others. Being a Fintech enthusiast, he loves reporting across Crypto, Blockchain, DeFi, Global Macros with a keen understanding in financial markets.
He is committed to continuous learning and stays motivated by sharing the knowledge he acquires. In his free time, Bhushan enjoys reading thriller fiction novels and occasionally explores his culinary skills.
Bhushan has a bachelors degree in electronics engineering, however, his interest in finance and economics drives him to crypto and blockchain.
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