A Chinese Creditor Obstructs FTX Settlement for Jurisdictional Crypto Restrictions
A significant development has emerged in the FTX bankruptcy proceedings, with a prominent Chinese creditor filing a strong objection against a recent motion submitted by the FTX estate. The motion, filed on Tuesday with the US Bankruptcy Court in Delaware, sought to postpone payments to residents in jurisdictions possessing restrictive cryptocurrency laws or regulations.
The creditor, Weiwei Ji, despite residing in Singapore and holding a Chinese passport, asserted herself as a representative of this objection, along with a large cohort of other Chinese creditors. The filing reportedly signifies that this group now counts over 300 individuals among its members.
Ji’s objection presents two central arguments: first, that FTX settlements utilize US dollars, recognized as a standard legal tender for repayment, rendering the geographical restriction moot for many creditors holding USD assets compliant with regulations. Second, Ji contends that the Chinese authorities classify digital assets as “personal property” and permit regulated cryptocurrency distributions within China; therefore, classifying Chinese creditors as restricted based solely on passport nationality is legally unsound.
“My family holds four KYC-verified accounts with aggregate claims exceeding $15 million USD… We have fully complied with every procedural requirement under the Plan. The proposed motion now jeopardizes our right to distribution arbitrarily and inequitably,” Ji stated in the filing.
FTX’s Motion to Impose Jurisdictional Limits
On July 2, FTX’s Estate filed its motion, explicitly delineating the jurisdictional risks. The motion stated that “Distributions made by or on behalf of the FTX Recovery Trust into jurisdictions in violation of these legal restrictions may trigger fines and penalties, including personal liability for directors and officers, and/or criminal penalties up to and including imprisonment.”
FTX identified a list of 49 countries and territories with unclear or restrictive stances on cryptocurrencies. This grouping is cited to preempt legal complications arising from distributing funds where local regulations might prohibit or strictly limit such transactions.
Included in the list, beyond China, are nations like Russia, Egypt, Ukraine, Afghanistan, Tunisia, Moldova, and Zimbabwe, among others. Moldova serves as an illustrative example in the filing: “In Moldova, it is a criminal offense to engage in `the activity of providing services regarding virtual assets … on the territory of the Republic of Moldova, including in cases where this activity is auxiliary/supplementary to the main activity.’“
Actual payouts commenced by the FTX Recovery Trust on February 18, initiating payments to ‘convenience class members’. Subsequent distributions to other claimants are scheduled over a 2.5-year period. Notably, settlement amounts have been factored based on the market value of the underlying FTT tokens at the time of FTX’s collapse – a factor that has fueled discontent among certain creditors.
While FTX’s move aims to shield its remaining assets from legal penalties, creditor Weiwei Ji and her group argue that imposing payout suspensions based on nationality or passport type unfairly disenfranchises compliant individuals like themselves, hindering timely and fair compensation according to established trust plans.
