FTX’s Bankruptcy Circus: Freezing Payouts in Crypto-No-Go Zones 🤪💰

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Oh, the tangled web we weave when first we practice to deceive! The FTX bankruptcy estate, in all its wisdom, has decided to raise a stink about paying off creditors in countries where the rules about cryptocurrencies are as clear as mud. 🤔

On Wednesday, the FTX estate filed a motion with the US Bankruptcy Court for the District of Delaware, asking for permission to freeze distributions to creditors in “potentially restricted foreign jurisdictions.” Imagine that! Freezing money in a place where it’s already cold. 🧊

These jurisdictions, a whopping 49 countries in total, have laws that are either as clear as a foggy morning or as restrictive as a straitjacket. The FTX estate is worried that if they distribute funds in these places, they might end up in hot water. 🌞

“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,” the filing reads. Sounds like a thrilling adventure, doesn’t it? 🚀

China and Russia among listed countries

With FTX creditors scattered all over the globe like confetti at a party, the bankruptcy estate is taking steps to make sure they don’t accidentally break any local laws. After all, who wants to be the one to accidentally start a crypto war? 🤯

While the regulations vary across the 49 identified countries, they generally prohibit individuals or entities from engaging in any activities related to digital assets. It’s like trying to play a game of chess where the rules change every other move. 🏹

“For example, in Macau, ‘financial institutions and non-bank payment institutions are prohibited explicitly by mainland authorities from providing services for these tokens and virtual currencies,” it stated. It’s like trying to sneak a chocolate bar into a no-sugar zone. 🍫

It added that all listed countries are subject to similar restrictions, including China, Egypt, Iran, Russia, Saudi Arabia, Ukraine, and others. It’s a veritable who’s who of crypto-no-go zones. 🚫

FTX estate needs clarity

While the FTX estate is highlighting these potentially restricted jurisdictions, they’re not completely shutting the door on payouts. Instead, they’re holding the distributions in a sort of crypto limbo, waiting for the legal fog to clear. 🌫️

According to the FTX estate, China accounts for 82% of the value of affected asserted claims among the total number of potentially restricted foreign jurisdictions. That’s a lot of crypto eggs in one basket! 🥚

Mainland China remains one of the most contentious jurisdictions regarding cryptocurrency, as regulators have repeatedly banned crypto transactions but have not explicitly prohibited individuals from holding digital assets. It’s like saying you can’t eat the cake, but you can keep it in the fridge. 🍰

Neighboring jurisdictions like Hong Kong have taken a pro-crypto stance, greenlighting crypto investment products like derivatives and exchange-traded funds. It’s like having a party next door while you’re stuck in a silent movie. 🎉🍿

“To provide clarity to the FTX Recovery Trust and its stakeholders alike, the FTX Recovery Trust has developed the restricted jurisdiction procedures to provide notice and a process for resolving the question of whether distributions will be made pursuant to the plan,” the estate said, adding:

“The court’s consideration and approval of the restricted jurisdiction procedures is consistent with, and in furtherance of, implementation of the plan.”

Although some in the community have expressed outrage over FTX estate’s approach to potentially restricted countries for distributions, others suggested that its stance is reasonable. After all, when it comes to token distributions in bankruptcy, there’s still a lot of legal uncertainty. 🤷‍♂️

“When it comes to token distributions in bankruptcy, there is still significant legal uncertainty, and it doesn’t surprise me that the FTX estate might not make distributions in countries where such distributions might be illegal,” Aaron Brogan, founder and managing attorney at Brogan Law, told CryptoMoon. It’s like trying to navigate a minefield with a blindfold on. 💣

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2025-07-04 17:55