Chinese Creditors Sue FTX Over $470M Withheld Repayment

More than 500 Chinese creditors are suing the bankrupt crypto exchange FTX in a U.S. court. According to a report, they are seeking the release of over $470 million in withheld payments. This group is challenging FTX’s recent decision to delay payouts to users in 49 jurisdictions, including China, where cryptocurrency laws are unclear or strict. 

Chinese Creditors to Ensure FTX Treats all Creditors Fairly

FTX’s legal team states that it needs to delay payouts in some regions due to the changing and unclear rules surrounding digital assets. However, Chinese creditors argue that this could create a risky situation, allowing failed exchanges to choose not to pay certain areas without good reason.

Notably, the group is also working with regulators to ensure that FTX treats all creditors fairly in its bankruptcy proceedings, regardless of their location. Their legal documents express concerns about the fairness of the process, the lack of proper procedures, and the questionable transparency from FTX’s restructuring team.

FTX Assess Distribution Challenges in 49 Countries

The FTX Trust has identified 49 foreign countries that may pose legal obstacles to distributing funds to creditors. 

These jurisdictions include major nations such as China, Russia, Ukraine, Pakistan, and Saudi Arabia. To address this, the Trust proposed a detailed process it calls the Restricted Jurisdiction Procedures. 

This plan involves hiring legal experts in each country to examine whether it is possible to make distributions while complying with local laws and regulations. If the legal review confirms that distributions can proceed in a particular country, the Trust will go ahead and work with service providers to deliver the funds.

In the meantime, the Trust is working on reducing the number of restricted jurisdictions. It plans to monitor legal changes and remove countries from the list whenever possible. Meanwhile, some creditors, especially those in China, expressed strong concerns about the proposed plan, calling it unfair and urging others to speak up.

FTX Recovery Trust Starts Second Round of Creditor Payments

Recall that the FTX Recovery Trust began the second round of creditor payments in May, releasing approximately $5 billion to eligible claimants. 

This is part of its ongoing effort to reimburse users affected by the collapse of the FTX cryptocurrency exchange. This latest distribution targets claimants in both the Convenience and Non-Convenience Classes who have completed all pre-distribution requirements.

According to the announcement, the payout covered various categories of claims. Dotcom Customer Entitlement Claims received a 72% reimbursement, while U.S. Customer Entitlement Claims received 54%. Recipients received the funds in their accounts within one to two business days via the official partners, Kraken and BitGo.