FTX Trust Halts Crypto Claim Payouts in 49 Nations Over Regulatory Hurdles

The FTX Recovery Trust has initiated a pivotal procedural step within the Delaware Bankruptcy Court, filing a motion that seeks to suspend compensation payouts to creditors located in 49 jurisdictions. This strategic move targets regions where local regulations either explicitly prohibit cryptocurrency operations or restrict the use of specific platforms designated for claim distributions. This development underscores the profound legal and regulatory complexities inherent in resolving large-scale crypto insolvencies across diverse international landscapes.

• The FTX Recovery Trust has filed a motion in the Delaware Bankruptcy Court to suspend compensation payouts in 49 jurisdictions.
• This measure affects approximately 5% of all authorized claims by value, with China representing 82% of these disputed claims.
• The primary reason for the suspension is to avoid potential penalties and sanctions for violating local regulations on cryptocurrency operations or the use of designated distribution partners.
• Affected creditors will receive formal notification and a minimum 45-day period to file an objection.
• The second round of FTX compensation payouts commenced on May 30, 2025.

Scope of Impact and Jurisdictional Challenges

The proposed suspension carries a significant scope, encompassing approximately 5% of all authorized claims by value within the FTX estate. A substantial portion of this segment, specifically 82% of the total value associated with these disputed claims, originates from China, underscoring the profound influence of its stringent regulatory frameworks on global crypto recovery efforts. The motion also identifies other nations with restrictive environments, including Pakistan, North Korea, Iran, Iraq, Belarus, and Ukraine, illustrating a diverse geopolitical spread of regulatory impediments. The core rationale, as articulated in the court filing, is to mitigate the risk of incurring penalties and sanctions. Proceeding with distributions in these jurisdictions could violate local statutes that either prohibit general crypto activities or specifically restrict the use of designated distribution partners such as BitGo and Kraken, thereby exposing the Trust to legal liabilities.

Creditor Notification and Objection Procedures

As detailed by FTX creditor Sunil Cavuri, referencing the court filing, the process for addressing these potentially suspended claims is meticulously structured. Upon court approval of the proposed procedure, affected creditors will receive formal notification outlining the specific reasons for the potential claim rejection. A crucial safeguard includes a minimum 45-day period during which creditors can formally file an objection to the proposed suspension. During this objection window, all distributions linked to contested claims will be temporarily withheld. Should a dispute remain unresolved following this period, the allocated amount, along with any accrued interest, is slated to revert to the general payout pool. Nevertheless, the Trust has unequivocally affirmed its commitment to exhaust all viable avenues for eventual distribution within these challenging jurisdictions, indicating a continued effort to find compliant solutions.

Broader Recovery Efforts and Regulatory Headwinds

This targeted motion for claim suspension is an integral component of FTX’s broader, ongoing asset recovery and distribution process. The second round of compensation payouts to eligible creditors commenced on May 30, 2025, a significant milestone in the restitution efforts. For authorized users, the receipt of funds typically necessitates formal approval and the selection of a preferred service provider. The persistent hurdles posed by disparate international regulations, starkly illuminated by this latest legal motion, serve as a potent reminder of the pervasive global compliance challenges confronted by entities operating within the inherently volatile digital asset ecosystem, even during the structured and meticulously planned phases of asset recovery.