FTX Freezes $500M in Disputed Creditor Claims from Crypto-Restricted Countries

05-Jul-2025 TheNewsCrypto

FTX seeks court approval to freeze $500M in payouts.
49 jurisdictions flagged, China holds 82% of value.

FTX’s bankruptcy estate has filed a motion seeking to freeze creditor distributions in 49 countries with restrictive or ambiguous crypto laws. On July 2, the estate asked the U.S. Bankruptcy Court in Delaware to approve a hold and review process. This move aims to ensure legal compliance before distributing crypto assets globally.

The estate warned that sending funds to these jurisdictions could trigger fines, personal liability, or even criminal charges. These risks stem from local laws banning crypto activity or third-party intermediaries. As a result, the FTX Recovery Trust proposes freezing affected payouts until legal clarity is secured.

Among the 49 jurisdictions, China accounts for 82% of the disputed claim value, despite making up just 5% of the total claims. While China bans crypto trading, holding digital assets remains legal. Chinese FTX users are challenging the freeze, arguing they have the right to receive dollar-based payouts offshore.

Upon court approval, the trust will issue a “Restricted Jurisdiction Notice” to affected creditors. Creditors will have at least 45 days to file objections. To do so, they must acknowledge U.S. court authority via a sworn declaration. If unresolved by the distribution record date, disputed funds will return to the estate.

Creditor Objections and Legal Ramifications

Failure to file timely objections will result in claim forfeiture. Even creditors who object but lose in court will forfeit their claims. One Chinese user confirmed consulting legal counsel and plans to object through every legal channel. FTX creditor advocate Sunil Kavuri emphasized that the trustee holds final authority unless the court rules otherwise.

FTX initiated its second repayment phase in May, aiming to distribute $5 billion. However, this freeze affects $500 million linked to blocked jurisdictions. The trust will resolve claims individually through legal opinions and court rulings. Distributions will resume only if compliance with local laws is confirmed.

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