FTX estate asks court to freeze payouts in ‘restricted’ countries

FTX’s bankruptcy estate has raised concerns over payouts to creditors in countries with ambiguous or restrictive cryptocurrency regulations.

On Wednesday, the FTX estate filed a motion with the US Bankruptcy Court for the District of Delaware, seeking authorization for the FTX Recovery Trust to freeze distributions to creditors in “potentially restricted foreign jurisdictions.”

The jurisdictions — 49 countries in total — have unclear or restrictive crypto laws, potentially posing risks due to complex cross-border legal implications.

“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.

China and Russia among listed countries

With FTX creditors located around the world, the bankruptcy estate is taking steps to ensure compliance with local laws in each jurisdiction before issuing cryptocurrency distributions.

Although regulations vary across the 49 identified countries, they generally prohibit individuals or entities from engaging in any activities related to digital assets, including crypto trading or distributing crypto-related proceeds to residents within those jurisdictions, the estate stated.

The list of potentially restricted jurisdictions is mentioned in FTX’s court motion on July 2, 2025. Source. Kroll

“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 added that all listed countries are subject to similar restrictions, referring to jurisdictions like China, Egypt, Iran, Russia, Saudi Arabia, Ukraine and others.

FTX estate needs clarity

While highlighting the potentially restricted jurisdictions for distributions, the FTX estate is not blocking the payouts to the mentioned countries entirely.

Instead, it said that the recovery trust is holding the distributions pending resolution and is ready to clear some of them as the process progresses.

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.

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.

Source: Zhetengji

Neighboring jurisdictions like Hong Kong have taken a pro-crypto stance, greenlighting crypto investment products like derivatives and exchange-traded funds.

Related: Crypto payments abroad may be legal despite domestic bans in several countries

“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:

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.

“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 Cointelegraph.

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