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- FTX faces high debts owed to global investors, but creditors from 26 countries, including China and Ukraine, are excluded from distributions.
- Legal constraints, including Decree No. 771, prevent FTX creditors from China, Iran, and Belarus from receiving payouts amid ongoing bankruptcy proceedings.
- Despite securing up to $16.5B in assets, many FTX creditors remain excluded from recovery, as legal actions challenge the fairness of the process.
FTX faces high debts owed to investors worldwide but creditors from 26 states such as Ukraine, China, and Russia have not been given any distributions. It came from an FTX creditor Sunil Kavuri, who posted on X on February 21st and pointed at the exclusion.
Global Effects of Bankruptcy
Kavuri shared a chart featuring a hearing on FTX Bankruptcy in November 2022 showcasing global effects. A breakdown of FTX’s user base by the country shows that China was the second biggest with 8% after Virgin Island’s 11% and the Cayman Island’s 22%. Nevertheless, investors from China and 27 other countries, among which Belarus and Iran, will be unable to receive payouts through BitGo and Kraken.
The exact cause of exclusion still remains unknown but is attributed to Decree No. 771 regulatory constraints and problems with cross-border payments are thought to be behind the decision. FTX’s insolvency case is currently under much scrutiny by the law thus limiting the distribution process by restricting some jurisdictions from receiving payments.
Once one of the leading companies in the cryptocurrency market, FTX declared bankruptcy in November 2022 due to various issues related to the management of the platform and fraud. This collapse along with its trading subsidiary Alameda Research created unprecedented disruption in the global cryptocurrency markets.
FTX Asset Recovery Plan
In October 2024, FTX announced that it has secured back between $14.7 billion to $16.5 billion of assets for distribution. The exchange had expected its indebtedness to its creditors at about $11.2 billion when it made the downturn. The announced settlement plan was also confirmed by the court and according to it 98% of the creditors are to receive 119% of their claims based on the values as on November 2022.
Nevertheless, numerous creditors are left out in the process of recovery of their loans and other assets, which fuel the issues of equity and accountability of bankruptcy. Now that FTX has crashed, several investors are stuck with nowhere to turn to be compensated for their loss. Due to ongoing legal proceedings supervised by the Delaware bankruptcy Judge John Dorsey, creditors’ legal actions exist in seeking to quash such exclusions.
