FTX Creditors Face New Challenges, Chinese Users May Lose Nearly $700 Million in Compensation

Recently, the FTX creditor representatives released the latest progress on debt compensation. According to the plan, on February 18, 2025, small creditors will receive 120% compensation; on May 30, 2025, large creditors will receive 72.5% compensation, while small creditors will still maintain the 120% compensation ratio. Subsequent payments are expected to be issued in October and December 2026, as well as gradually in 2027. After receiving 72.5% compensation, large creditors will continue to receive 27.5% of the face value compensation, ultimately achieving 100% compensation.

However, just as the creditors were looking forward to the arrival of compensation, new variables emerged in the FTX creditor claims. On July 4, creditor representatives announced that creditors from 49 jurisdictions, including China, may lose their rights to claim. The claims from these jurisdictions account for 5% of the total funds, approximately $825 million, of which 82% belongs to Chinese creditors, valued at about $676.5 million.

For creditors in these restricted areas, FTX stated that it will seek legal advice for distribution. If it is determined that a user belongs to a restricted foreign jurisdiction, their claims will be disputed. Users have 45 days to raise objections, but if the issue is not resolved, users will completely lose their rights to distribution, and their compensation shares will be confiscated and returned to the FTX liquidation trust for distribution to other legitimate creditors in different countries and regions.

This news has caused strong dissatisfaction among the affected users. Some users have stated that they will take legal action and are calling for more people to join in protecting their rights. They believe that although cryptocurrency trading is not supported in mainland China, the law recognizes the commodity attributes of virtual currencies, and Chinese residents are allowed to hold cryptocurrencies and hold US dollars abroad.

In the face of this dilemma, how should Chinese creditors "collect debts"? Currently, several third-party platforms have emerged in the market that provide debt sale services for FTX creditors. These platforms offer Chinese users various solutions, including selling debts, transferring debts to overseas entities, transferring debts in the name of overseas trustees, and changing residence, among others.

For most small creditors, using legal means may be too costly. Therefore, selling claims at a discount through a third-party platform may be a relatively feasible option. Although this means incurring some losses, it can also achieve partial recovery of funds.

Although some time has passed since the FTX collapse, the scars left on all parties involved have yet to heal. In this rapidly changing crypto world, we must reflect: will the cryptocurrency that once carried the dream of wealth ultimately only become dollars in the pockets of legal teams? This case once again reminds us that the importance of risk management and legal protection in cryptocurrency investment cannot be ignored.