Chinese creditors push back against FTX's motion to forfeit payouts in restricted jurisdictions

A Chinese creditor of FTX has filed an objection to its latest motion that allows it to potentially forfeit creditor distributions in restricted jurisdictions.

The creditor, Weiwei Ji, submitted the objection to the Delaware Bankruptcy Court on behalf of over 300 Chinese FTX creditors, according to the filing. Despite being a tax resident of Singapore, Ji said he was categorized as a Chinese creditor by FTX due to his Chinese passport.

"My family holds four KYC-verified FTX accounts with aggregate claims exceeding $15 million," Ji said. "We have fully complied with every procedural requirement under the plan. The proposed motion now jeopardizes our right to distribution in an arbitrary and inequitable manner."

Ji's objection comes less than a week after the FTX Recovery Trust filed its latest motion to assess creditor claims in 49 potentially restricted jurisdictions, including China, Russia and Pakistan. 

The motion suggests FTX engage local legal experts to assess the feasibility of compliant distributions within each jurisdiction. If compliance proves unfeasible in a particular region, FTX would designate it as restricted. While creditors could object to such designations, any unchallenged or overruled restrictions would allow FTX to relinquish claims in those regions and redirect them to the trust for reallocation.

The claims in the 49 jurisdictions total around $800 million, with China accounting for 82% of the value in potentially restricted regions, according to The Block's calculations based on an earlier filing.

"This motion to designate China as a 'restricted jurisdiction' is unsupported by either fact or law," Ji wrote. 

Ji said that FTX claims, denominated in U.S. Dollars, could be lawfully distributed to Chinese creditors through established channels like Hong Kong-based accounts, as demonstrated in the Celsius Network case .

The filing added that crypto is recognized as legal property in China, and supported by progressive regulations in Hong Kong.

"Distributing claims to Chinese creditors poses no legal risk to the Trustee or its agents and constitutes a required step under the bankruptcy process," Ji said. "I respectfully urge the court to reject any designation that would exclude Chinese creditors from distributions."