Key highlights:
• A Chinese FTX user representing 300 others has formally objected to a bankruptcy clause excluding creditors based on geography.
• The proposal could deny payouts in 49 countries, with 82% of the affected claim value linked to China.
Yello Paradisers! The fallout from FTX’s $16 billion collapse is far from over, and now, it’s not just about missing crypto. It’s about who gets paid back, and who’s cut out, purely based on where they live.
A Chinese FTX customer, Weiwei Ji, has filed a formal objection in U.S. Bankruptcy Court, accusing the exchange’s latest restructuring plan of unlawfully discriminating against creditors in “Restricted Jurisdictions,” including China, Russia, Pakistan, and Ukraine.
If the plan is approved, users in these countries, even those with valid, undisputed claims, could be barred from any payout, unless the Recovery Trust receives legal clearance to operate in their region.
Geography Overdue Process? The Legal Battle Begins
The clause, embedded in the Trust’s proposed handling system for foreign claims, would allow the estate to forfeit claims in restricted countries after a 45-day objection window, regardless of claimant status or innocence. No wrongdoing required, just the wrong passport.
According to filings:
- China accounts for 82% of the restricted region claim value
- The total at-risk pool represents roughly $800 million in creditor claims
- The policy is being defended on the basis of legal compliance, but critics argue it violates the equal treatment clause in U.S. bankruptcy law (Section 1129(b)(1))
Ji’s objection argues there’s no statutory authority to exclude lawful creditors by geography, and that the clause would set a dangerous precedent for international bankruptcy fairness.
The Bigger Picture: Cross-Border Creditor Chaos
FTX’s proposed workaround would involve hiring attorneys in each country to verify whether distributions are legal under local law. If not, claims would revert to the estate and be labeled “Disputed.” But critics say that’s impractical, legally untested, and fundamentally unfair.
More than 300 Chinese creditors have signed onto Ji’s objection, warning that this plan punishes users for regulatory ambiguity, not any actual misuse of the platform.
Meanwhile, the FTX Recovery Trust has added Payoneer to help with broader distribution, but with only 93 countries covered, many creditors remain locked out, despite filing on time.
The court is set to rule on the matter July 22, a decision that could define how crypto bankruptcies are handled across borders for years to come.
The impact of this will be discussed in MCP News Private and in our YouTube stream. We’ll dive into the potential legal fallout, claim strategies for restricted users, and how similar rulings might affect future bankruptcy proceedings.
MCP News Private will follow up on this with a deeper breakdown and real-time reactions from the market.
For just $3/month, less than your VPN subscription you may need to access those blocked claims, you get clarity, not guesswork.
And if you’re navigating the aftermath of FTX or positioning in similar distressed crypto events, ParadiseFamilyVIP is your safest bet.
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FTX’s $16B recovery plan could block payouts to 49 countries, because of where users live, not what they did. When geography trumps due process, every crypto trader should pay attention. Is your strategy built for fairness, or just hope?
