Over 500 Chinese Creditors Challenge FTX $470 Million Payout Freeze

A growing group of Chinese creditors is intensifying efforts to challenge FTX's recent legal maneuver to delay payouts worth $470 million. These creditors, affected by the bankrupt exchange's decision, are turning to U.S. courts and regulators to contest the freeze, citing concerns about fairness, transparency, and procedural integrity.

FTX, once one of the world's leading cryptocurrency exchanges, filed for bankruptcy in November 2022 following allegations of financial mismanagement and fraud. Since then, creditors from various jurisdictions have been grappling with the complexities of recovering their funds.

The latest legal action targets users in 49 jurisdictions, including China, where crypto laws are either restrictive or ambiguous.

Notably, Chinese creditors account for $380 million of the disputed $470 million payout—roughly 82% of the restricted total—making them the most significantly impacted group.

Frustration and Coordinated Action

Speaking with CryptoSlate, Will, a prominent advocate for Chinese creditors, shared that he is working closely with a growing group of over 500 members.

“Many of whom are taking coordinated actions such as writing letters to the judge and U.S. Trustee, and exploring group legal representation,” Will noted.

Their frustration centers around FTX's recent motion asking the court for permission to hold back distributions to creditors in countries with ambiguous crypto rules.

Will emphasized the human cost behind the numbers, stating, “$470 million is not just a cold number — behind it are countless families already hurt once. A second wound is unfolding. We can’t stay silent.”

New Developments from the Community

Will recently shared updates on X about the growing momentum within the group. According to him, 35 individuals have already mailed objections to the U.S. court, with the number steadily increasing. Will emphasized the importance of collective action, urging more Chinese FTX creditors to join the effort, stating, “The more voices, the better.”

In his post, Will also highlighted key contributions from the community:

1. A group member shared screenshots from the Mt. Gox repayment process, showing that Chinese KYC users successfully received BTC, BCH (via Kraken), and even fiat currency (JPY via PayPal) in 2024. This serves as a precedent for how creditors in restrictive jurisdictions can recover their funds.

2. A U.S.-based journalist reached out to Will, revealing surprising information gaps about FTX’s operations. The journalist mistakenly believed that all Chinese users had offshore accounts, unaware that FTX.com was fully accessible to Chinese KYC users. Will provided evidence to clarify this misconception, potentially bridging critical knowledge gaps.

Additionally, Will shared that his U.S.-based legal counsel has returned from vacation, and they are scheduled for a video call to strategize the next steps in the legal proceedings.

Broader Implications

These creditors argue that FTX's actions contradict earlier promises. They claim they were explicitly told that as long as they submitted claims and voted in favor of the restructuring plan, they would be entitled to distributions like everyone else. Now, however, they are being denied rightful compensation due to their nationality or legal uncertainties.

This development underscores the broader challenges faced by creditors globally as they navigate the legal and regulatory hurdles in recovering funds from the collapsed exchange. The case has also sparked debates about the role of U.S. courts in adjudicating international crypto disputes and the need for clearer global standards in the industry.

As the case unfolds, it could set a precedent for how similar disputes are handled in the future, especially in jurisdictions with restrictive crypto frameworks. For the affected Chinese creditors, the fight is not just about recovering funds but also about challenging the broader implications of regulatory disparities in the crypto space.