The FTX Recovery Trust Takes Steps to Address Creditor Claims in Restricted Foreign Jurisdictions
In a recent development, the FTX Recovery Trust has informed the Delaware bankruptcy court that it will treat creditor claims from 49 foreign jurisdictions as disputed. This decision comes as a result of local rules that prohibit either crypto trading or the use of distribution agents in these markets. The trust stated that it cannot release funds to customers in these countries until a legal analysis confirms that payouts would not violate local law.
The list of countries includes a wide range of nations such as China, Nigeria, Andorra, Fiji, and Zimbabwe, among others. These countries are all part of the “Potentially Restricted Foreign Jurisdictions” schedule attached to the motion. The trust has outlined a hold-and-review framework that will be implemented once the court authorizes the procedure. A “Restricted Jurisdiction Notice” will be sent to every creditor address in the affected countries, explaining the basis for the designation and setting an objection deadline of at least 45 days from the notice’s date.
Creditors who wish to object must submit a sworn statement accepting the jurisdiction of the US court. During the objection period, all distributions linked to the challenged claim will be suspended. If the dispute remains unresolved on a distribution record date, the withheld amount and any accrued interest will revert to the estate. If a creditor files a timely objection, the trust must seek a court ruling on the reasonableness of its determination of restricted jurisdiction.
The filing also warns that failure to object will result in automatic forfeiture once the objection deadline passes. Creditors who lose the dispute will face the same outcome. The trust defines service of notice as complete once mail or email reaches the last address on file, stating that the effort is deemed “commercially reasonable.”
It was noted that the 49 jurisdictions represent about 5% of allowed claims, with China holding 82% of their dollar value. The creditor advocate, Sunil Kavuri, summarized the trust’s playbook as involving obtaining a legal opinion on each jurisdiction, distributing it where feasible, and formally disputing claims when residence in a blocked market is confirmed. The filing reiterates that claims will remain “Disputed Claims” until the status of the Potentially Restricted Foreign Jurisdiction is resolved and the claim is either allowed or disallowed.
Overall, the steps taken by the FTX Recovery Trust to address creditor claims in restricted foreign jurisdictions aim to ensure compliance with local laws and regulations while protecting the interests of all parties involved. This proactive approach underscores the trust’s commitment to navigating the complex legal landscape surrounding crypto trading and distribution in different parts of the world.