FTX creditors in 49 countries face payout exclusions amid regulatory clampdown. This situation has sparked global concern, particularly for users in China, Nigeria, Russia, Egypt, and other restricted regions. The FTX bankruptcy process, already one of the most complex in crypto history, has now introduced jurisdiction-based claim exclusions. These exclusions could significantly reduce recovery access for thousands of international users. The regulatory barriers appear to stem from both U.S. Treasury sanctions programs and domestic financial restrictions in recipient countries, creating a perfect storm of compliance challenges. Many affected creditors report having maintained legitimate accounts for years without prior warnings about potential payout limitations based on geography.
The issue at hand is whether FTX’s proposed recovery framework, which limits payouts to residents of certain countries, is fair, legally sound, and compliant with both U.S. and foreign laws. As the bankruptcy estate moves toward a third major distribution of funds, creditors in these restricted regions are racing against the clock to protect their claims. Legal scholars note that this approach conflicts with fundamental bankruptcy principles of equitable treatment, potentially favoring Western creditors despite FTX’s global user base. The estate’s decision appears driven by risk aversion rather than explicit legal mandates, creating what experts call “de facto financial discrimination.”
This development is not just a technicality. It’s a major legal flashpoint that could set precedent for how crypto bankruptcies are handled globally, particularly when it comes to regulatory compliance and creditor rights across borders. The situation highlights the tension between national security concerns and creditor protections in decentralized financial systems, with implications extending far beyond this single case to future crypto insolvencies worldwide.
Background on FTX Bankruptcy and Payout Plan
After its collapse in November 2022, FTX entered Chapter 11 proceedings, becoming the highest-profile crypto bankruptcy to date. Under new leadership, the estate sought to recover and return assets to users. Over $16 billion in recoverable assets have since been identified through aggressive clawback litigation and asset liquidation. Two major distributions were already executed in March 2024 and January 2025, providing partial repayments averaging 37% of claim values to verified creditors.
The estate introduced a tiered payout model prioritizing institutional creditors and verified retail customers with documented claims. Creditors had to submit Know Your Customer data, proof of claim, and jurisdictional information to qualify for disbursement. The next round of payouts, estimated at $1.9 billion, is set for September 30, 2025, and represents the largest single distribution to date. This phase targets returning approximately 65% of remaining claim values after prior distributions.
But in recent motions, FTX’s estate proposed to exclude creditors from 49 countries unless those jurisdictions passed a legal opinion test. These include regions facing U.S. sanctions, unstable regulatory environments, or uncertain legal pathways for cross-border payouts. Countries like China, Nigeria, and Russia are on this list along with Venezuela, Afghanistan, and Myanmar. The exclusion criteria appear disproportionately focused on Global South nations, with over 85% of affected creditors residing in developing economies.
Affected creditors received a Restricted Jurisdiction Notice, triggering a 45-day window to object, relocate jurisdiction, or forfeit their claims. The notice delivery mechanism has faced criticism, with many recipients reporting technical issues accessing the claims portal or receiving notifications after response deadlines had already started counting down.
What Are “Restricted Jurisdictions”?
Restricted jurisdictions are countries or regions where the FTX Recovery Trust claims it may be illegal or impractical to send payouts. This includes locations under comprehensive U.S. sanctions (like Cuba and Syria), those with ambiguous crypto laws (like Nigeria and Egypt), or areas with weak enforcement structures (such as Libya and Yemen). The designation also encompasses nations with capital controls that might prevent funds from leaving the country after distribution.
FTX argues that paying users in these jurisdictions could expose the estate or its payment providers to regulatory or criminal liability, particularly under OFAC regulations or anti-money laundering statutes. However, critics argue that the designation process lacked transparency and judicial approval, effectively denying thousands of creditors access to their recovery. The trustee reportedly relied on third-party compliance databases without independent verification of current regulatory conditions in each jurisdiction.
To remain eligible, users from these areas must prove, within 45 days of receiving a Restricted Jurisdiction Notice, that payouts are lawful through certified legal opinions from licensed attorneys in both their home country and the United States—a prohibitively expensive requirement for most retail creditors. Alternatively, they must change their jurisdiction of record by providing documentary evidence of relocation to permitted territories.
Scope and Financial Impact
Over 150,000 individual creditors may be impacted by the restricted jurisdiction policy. Some estimates suggest that up to $2.6 billion in claims could be in jeopardy. This accounts for nearly 17% of the entire creditor pool and represents life-changing sums for many retail investors who had their entire savings trapped in the exchange.
Most impacted creditors reside in China (approximately 42,000 claims), Russia (31,000 claims), Nigeria (28,500 claims), and Egypt (12,000 claims). Users from these countries often used FTX as their primary trading platform, given its international accessibility and low transaction costs before its collapse. Many had turned to crypto precisely due to unstable local currencies and restrictive traditional banking options.
The financial impact is severe. Excluded users could lose all access to future distributions, including the $1.9 billion payout expected in September 2025. Moreover, their claims will be reclassified as disputed, limiting their participation in the recovery process and affecting potential secondary market sales of those claims. Claim valuations have already plummeted 60-75% on secondary markets like Claims Market and Xclaim for affected jurisdictions.
This move also affects institutional entities based in restricted regions. Several hedge funds and OTC desks that operated through shell companies in the Caribbean or Asia now face exclusion as forensic accounting revealed beneficial ownership ties to sanctioned territories. The domino effect extends to local crypto businesses that served as on-ramps for FTX users in these markets.
Legal and Creditor Responses
The restricted jurisdiction policy triggered swift backlash. Legal advocates for creditors argue that excluding claims based on geographic location may violate principles of equal treatment in bankruptcy proceedings and potentially contravene international comity principles. Professor Elena Baylis (University of Pittsburgh Law) notes: “This creates a two-tier creditor system where accident of geography determines recovery rights—something bankruptcy courts traditionally avoid.”
Several creditor groups have organized legal objections, including the FTX International Creditors Alliance which represents 18,000 affected users. In some cases, they pooled resources to hire attorneys who could challenge the exclusion motion directly in Delaware bankruptcy court. These objections focused on the lack of a court-sanctioned process for defining restricted jurisdictions and the opaque criteria used. Technical arguments highlighted that many creditors originally deposited USD or stablecoins rather than prohibited securities.
The FTX bankruptcy court has acknowledged the need for due process. It ordered revisions to the motion, including a requirement that the estate must provide affected users with formal notices and an opportunity to object. Judge Dorsey specifically questioned why certain jurisdictions with clear crypto frameworks like Nigeria faced restrictions while others with ambiguous regulations did not.
Lawyers representing offshore users called the exclusion model “effectively extrajudicial,” warning that it sets a dangerous precedent for future cross-border insolvencies. International regulatory bodies have yet to weigh in, but the issue is gaining attention among cross-border insolvency experts at UNCITRAL and the World Bank, who worry about fragmented global standards. The International Association of Restructuring, Insolvency & Bankruptcy Professionals plans to address the case in their upcoming cross-border protocol revisions.
Practical Advice for Restricted-Country Creditors
Residency Status Updates
Creditor lawyers advise affected users to update their residency status immediately, if eligible. For example, if a creditor from Nigeria has moved to the UAE or Singapore, they should update their FTX account records to reflect this change before the August 15, 2025 cutoff date. Documentation must include notarized proof of new residency such as lease agreements, utility bills, or employment contracts dated within the past 90 days. Dual citizens should consider claiming citizenship in unrestricted jurisdictions where possible.
Transfer Claims to Unrestricted Jurisdictions
Some creditors are opting to transfer their claims to entities or custodians located in unrestricted jurisdictions through assignment agreements. This process must be completed by the record date to ensure the new holder is eligible for the upcoming payout. Reputable claims brokers like Cherokee Acquisition and Claims Commission offer specialized services for blocked jurisdictions, though fees range from 5-15% of claim value. All transfers require pre-approval from the claims administrator.
Respond Promptly to Notices
Upon receiving a Restricted Jurisdiction Notice, creditors have 45 days to respond. Failure to do so may result in claim forfeiture or indefinite delays in recovery. Users must either provide legal documentation proving payout legality or request reclassification. Template objection forms are available through creditor advocacy groups like FTX Creditor Defense Coalition. Electronic submissions through the Kroll portal are preferred, with postal submissions requiring certified mail.
Preserve Legal Documentation
Affected users should gather passports, residence permits, and legal opinions from local counsel. These will support jurisdiction reclassification requests or serve as evidence in a formal objection. Documentation should establish both identity and regulatory environment—specifically highlighting any local precedents for cross-border crypto settlements. Creditors should maintain timestamped copies of all submissions given portal instability issues.
Monitor the Claims Portal and Court Filings
FTX’s claims portal provides regular updates. Users should monitor it daily for objection rulings, approval of reclassification, or revised payment instructions. Following court developments closely is critical to avoid missing key deadlines. The Delaware docket (Case No. 22-11068) contains all legal motions, with key filings expected regarding jurisdiction appeals through July 2025. Creditors should register for automated docket alerts through Kroll’s case management system.
Explore Alternative Dispute Resolution
The court has encouraged mediation for complex jurisdictional disputes. Groups of creditors from the same country can jointly petition for regional mediation sessions, potentially streamlining the verification process. Successful mediations in June 2025 resulted in Venezuela and Uzbekistan being removed from the restricted list after demonstrating compliant payment pathways.
Final Thoughts
FTX creditors in 49 countries face payout exclusions amid regulatory clampdown. The outcome now hinges on how that motion evolves. After hearings in July 2025, the court rejected the estate’s original plan and demanded a fairer process. It ruled no seizure of funds and required a clear reclassification path for affected creditors. The judge emphasized that blanket exclusions constitute overreach when individualized determinations are feasible.
Now a revised framework offers hope. The FTX Recovery Trust must collect legal opinions and permit claim transfers to non-restricted jurisdictions like Singapore or the UAE. Creditors now have a structured 45-day objection window and must act fast to meet the August 15 record date and qualify for the September 30, 2025 distribution. The trust has established regional help desks in London, Dubai, and Hong Kong to assist with documentation challenges.
Overall, the issue underscores broader implications for global crypto bankruptcies. Jurisdiction-based exclusions may become templates for future cases unless courts establish clearer standards. Courts and creditors must balance compliance with fair treatment. The FTX case could set lasting legal and structural precedents across crypto recovery frameworks, potentially influencing ongoing cases like Celsius and Voyager. As digital assets continue transcending borders, this proceeding may catalyze new international protocols for cross-border crypto insolvencies.
For now, proactive legal action, residency updates, and strict adherence to documentation deadlines define the best path forward. The process remains complex, but transparency has improved through court-mandated disclosures. FTX creditors in 49 countries face payout exclusions amid regulatory clampdown—but the landscape is shifting. With informed steps and collective advocacy, many may still receive their share, though the path requires navigating unprecedented legal terrain at the intersection of bankruptcy law and international finance.
