FTX’s bankruptcy administrators are moving to pause payouts to creditors in nearly 50 countries where cryptocurrency rules remain restrictive or legally ambiguous.
In a motion filed Wednesday with the U.S. Bankruptcy Court in Delaware, the estate requested authorization for the FTX Recovery Trust to temporarily withhold distributions to regions labeled as “potentially restricted foreign jurisdictions.”
The filing cited serious concerns about exposure to civil and criminal liability if funds were transferred into countries with bans or unclear policies on crypto transactions.
“Distributions made into jurisdictions in violation of these legal restrictions may trigger fines and penalties, including personal liability for directors and officers, and criminal penalties up to and including imprisonment,” the estate warned in court documents.
China, Russia Among Countries With Tight Controls
The list of impacted jurisdictions spans 49 countries, including China, Russia, Iran, Saudi Arabia, and Egypt—nations where local rules generally prohibit trading, distributing, or facilitating crypto transactions.
FTX said it must ensure that any distributions comply with applicable local regulations before sending funds to creditors.
Citing an example from Macau, the estate noted that:
“Financial institutions and non-bank payment institutions are prohibited explicitly by mainland authorities from providing services for these tokens and virtual currencies.”
Other regions on the list have similar prohibitions or restrictions, complicating efforts to deliver repayments to affected users.
China Accounts for Majority of Affected Claims
Despite the wide scope of the freeze, the estate emphasized that it is not outright denying payouts to creditors in the affected countries.
Instead, distributions will be held pending further legal review, with the possibility of clearing claims on a rolling basis as compliance issues are resolved.
According to the filing, China alone accounts for 82% of the total asserted claims value tied to the flagged jurisdictions.
China’s stance on crypto remains among the strictest globally, with repeated bans on trading and mining. However, authorities have not explicitly banned individuals from owning digital assets, further complicating enforcement.
Meanwhile, neighboring Hong Kong has moved in the opposite direction, authorizing regulated crypto investment products and establishing itself as a regional hub for digital finance.
Quick Fact
- FTX is seeking court approval to freeze distributions to creditors in 49 countries.
- China accounts for the bulk of affected claims, reflecting its sweeping bans on crypto activity.
- The estate plans to release funds in phases as legal clarity emerges in each jurisdiction.
