The FTX Recovery Trust has issued a formal motion to the court seeking approval to adopt new procedures. They aim at facilitating the distribution of funds to creditors in certain foreign jurisdictions, many of which are currently subject to legal restrictions.
According to the filing submitted on Wednesday, the Trust identified 49 countries where local laws may obstruct the disbursement of creditor claims.
Notably, these jurisdictions include China, Russia, Ukraine, Pakistan, and Saudi Arabia.
Together, claims from these regions represent about 5% of the estimated $16 billion in total potential creditor claims.
Significantly, China accounts for 82% of the value tied to these restricted areas, making it a focal point of concern.
Proposed Legal Assessment Framework to Guide Distributions
In order to navigate the complex legal landscape, the FTX Recovery Trust has introduced a proposal titled the “Restricted Jurisdiction Procedures.”
The initiative aims to employ legal experts in each of the affected jurisdictions to assess whether fund distribution can legally take place in accordance with local regulations.
Should a jurisdiction be deemed legally compliant, the Trust will proceed with disbursing the owed amounts through licensed distribution service providers.
However, if the legal review concludes that fund transfers are impermissible under a country’s laws, the Trust will formally notify affected creditors and seek a court order to designate that region as “restricted.”
The step would prevent any immediate distribution while still allowing creditors a 45-day window to file objections.
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Consequences for Creditors in Non-Compliant Jurisdictions
For regions where legal compliance cannot be confirmed and no successful objections are raised.
The Trust plans to forfeit the distributions to affected creditors and reabsorb the funds back into the estate for redistribution elsewhere.
These claims will be classified as “Disputed Claims” until either local laws change or a legal pathway is established.
The filing emphasizes that “distributions that cannot be made due to the illegality of doing so under the laws of a Restricted Foreign Jurisdiction will not be made,” and any claim to such distributions “shall revest in the FTX Recovery Trust.”
While this approach is intended to protect the estate from potential legal exposure, it could leave thousands of users in limbo, especially those in jurisdictions with unclear or unfavorable legal environments.
Mixed Reactions from Affected Creditors, Especially in China
The proposal has already triggered significant backlash from affected users, particularly in China, which represents the largest share of claims among the restricted jurisdictions.
One vocal creditor, known by the handle @zhetengji on social media platform X, stated, “I will definitely take action and will raise objections at every stage,” urging others in similar situations to mobilize against the proposal.
The creditor called the plan “absolutely unreasonable,” reflecting a growing sentiment among international FTX victims who feel sidelined by legal constraints beyond their control.
With a court hearing scheduled for July 22, these objections are expected to be formally addressed in the coming weeks.
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Limited Progress Despite New Distribution Partners
In an effort to improve global outreach, the FTX Recovery Trust recently added Payoneer as a third-party distributor, expanding its network to assist users in 93 jurisdictions.
Despite this expansion, many users in restricted countries continue to express frustration that they remain excluded from the payout framework.
Social media posts reveal a growing divide between creditors in supported regions and those caught in regulatory gray zones.
The Trust emphasized in its filing that it “continues to make efforts to reduce the number of countries on this list” and is open to removing jurisdictions from restriction status if local legal conditions improve.
Until then, however, users in restricted areas may find themselves indefinitely delayed in recovering their funds.
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