Chinese Creditors vs. FTX: The Great Crypto Showdown!

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In a twist worthy of a Terry Pratchett novel, the bankrupt exchange FTX finds itself in a legal tangle with a group of Chinese users who are none too pleased with the exchange’s latest proposal to waive creditor settlements in certain regions. 😈

On July 8, 2025, FTX creditor Weiwei Ji filed an objection in the Delaware Bankruptcy Court, representing 300 others in opposition to the exchange. 📜

Central to the filing is the rejection of the bankruptcy estate’s proposal to restrict payouts to users in 49 jurisdictions, where crypto is banned or unclear under local law. China, which accounts for more than 80% of the affected claim value, is one of the key regions under review, alongside countries like Russia, Morocco, North Korea, and others. 🌏

If officially designated, creditors in these regions could be excluded from the ongoing distribution process. 💸

Ji, a Chinese passport holder and tax resident of Singapore, argued that the inclusion of China in the list is both factually wrong and legally unsupported, arguing that distributing funds to users in the region carries no regulatory or criminal implications. 👮‍♂️

“The FTX Recovery Trust’s attempt to withhold distributions from Chinese creditors based on jurisdictional interpretations of crypto regulation is both unreasonable and legally unfounded,” Ji wrote. “There is no credible legal basis to conclude that distributions to Chinese creditors would subject the Trust, or any distribution agent, to regulatory or criminal risk.”

He noted that FTX claims are denominated and settled in U.S. dollars, not crypto, and can be lawfully received by Chinese residents through standard channels, including wire transfers via Hong Kong-based accounts. 💵

To strengthen his case, Ji emphasized the legal status of crypto in China.

Crypto holdings, not trading, are ‘lawful’ under Chinese laws

While retail trading may be restricted, Ji argued that crypto ownership remains legal in the country, with courts recognizing assets like Bitcoin (BTC) and Ethereum (ETH) as personal property. This view has been supported by past rulings, including a 2024 ruling by a Shanghai Court that affirmed the protection of digital assets under civil law. 🏛️

He also pointed out that Hong Kong, which maintains a more favorable stance on crypto, operates under a separate legal framework and actively supports regulated digital asset activity. 🇭🇰

Supporting his case, Ji cited legal precedent, including the Celsius bankruptcy, where Chinese users were paid in USD, and the Mt. Gox rehabilitation, where Chinese creditors successfully received crypto payouts through Kraken, emphasizing that neither case imposed restrictions based on jurisdiction. 📚

FTX’s motion remains under review ahead of a court hearing scheduled for July 22, and Ji is urging the court to reject any designation that would exclude Chinese creditors from receiving their share under the bankruptcy plan. ⚖️

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2025-07-10 12:01