- The estate is seeking court authorization to suspend distributions through the FTX Recovery Trust over crypto law risks.
- Countries affected include China, Russia, Egypt, Iran, and Saudi Arabia, where potential legal violations could result in fines or imprisonment.
The FTX bankruptcy estate has filed a motion to temporarily freeze creditor distributions in 49 countries with restrictive or unclear cryptocurrency laws, citing potential legal risks and exposure for its directors.
In a motion filed Wednesday with the U.S. Bankruptcy Court for the District of Delaware, the FTX estate asked for authorization to suspend distributions through the FTX Recovery Trust to creditors in jurisdictions where local laws may prohibit crypto transactions or related activities.
The list includes countries such as China, Russia, Egypt, Iran, and Saudi Arabia. The estate noted that violating these restrictions could result in civil or criminal penalties, including fines or imprisonment.
China represents the largest exposure among the affected jurisdictions, accounting for roughly 82% of the total value of disputed creditor claims. The estate said it is holding distributions to these countries until it receives further legal clarity or guidance.
While China has repeatedly banned crypto transactions, it does not clearly prohibit individuals from owning digital assets, creating legal ambiguity around repayments.
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The FTX estate clarified that it is not permanently blocking distributions to these countries. Instead, it is pausing them while reviewing legal risks and awaiting potential resolutions.
The move aims to prevent possible violations of local regulations during the creditor payout process, which spans multiple jurisdictions. Countries with complex or restrictive laws could expose the estate to legal and regulatory penalties if it proceeds without confirmation.
The filing also highlights regulatory disparities in the Asia region. While mainland China has taken a hardline stance on crypto, Hong Kong has introduced supportive frameworks and approved crypto investment products.
Community responses to the motion have been mixed. Some creditors expressed concern about the delay in distributions, while others said the estate’s approach reflects a necessary legal safeguard. The bankruptcy court will now decide whether to approve the estate’s request to pause distributions as legal reviews continue.
