FTX's claims face another setback, will it not repay the $670 million owed to Chinese users?

Author | Golem, Odaily

On July 1, FTX creditor representative Sunil published an update on the creditor compensation situation:

• On February 18, 2025, the compensation ratio for users with amounts less than $50,000 is 120%;
• On May 30, 2025, users with amounts exceeding $50,000 will receive a compensation rate of 72.5%, while users with amounts less than $50,000 will receive a compensation rate of 120%;
• The expected compensation distribution times in the future are: October and December 2026, as well as 2027;
• Users whose amount exceeds $50,000 and have already received 72.5% compensation will subsequently receive 27.5% of the face value compensation, achieving a total of 100% compensation. (Note: Based on the compensation situation, the interest rate for FTX creditors after applying for compensation is approximately 40-80%.)

Just when the creditors were planning to wait calmly for their compensation, the FTX claims for debt have encountered some issues.

On July 4th, Sunil, a representative of FTX creditors, posted on the X platform stating that creditors from 49 jurisdictions, including China, may lose their right to claim. The claims from these regions account for 5% of the total funds, amounting to approximately $825 million (calculated based on $16.5 billion in total compensation assets), of which 82% belong to Chinese creditors, with a claim asset value of about $676.5 million.

List of jurisdictions where claims may not be obtained

At the same time, Sunil stated that FTX will seek legal advice for distribution to restricted foreign jurisdictions. However, if it is determined that users belong to restricted foreign jurisdictions, claims will be disputed, and users will have 45 days to object. If the issue is not resolved, users will completely lose their distribution rights, and their compensation shares will be confiscated and returned to the FTX liquidation trust for distribution to legal creditors in other countries and regions.

In fact, when FTX officially began compensating users with amounts less than $50,000 on February 18, it indicated that users from five regions including China, Russia, Egypt, Nigeria, and Ukraine were temporarily unable to participate in the claims distribution, among which the number of Chinese users is the largest, accounting for 8% of FTX's total user base.

Victimized users at the time may have believed that the limitation on claims was temporary due to judicial district restrictions, and that FTX would be able to propose solutions in the future. However, the news released today has expanded the regions that limit claims, and the statements have almost sentenced the claims rights of creditors in the restricted regions to death.

For actions like those of FTX, the anger of the victimized users can no longer be suppressed. User @zhetengji stated that they have already contacted a lawyer in New York and called for more people to take action:

I will definitely take action and raise objections at every stage. I also hope that more people can stand up. We cannot just sit and wait – this is absolutely unreasonable. Although mainland China does not support cryptocurrency trading, residents of mainland China are allowed to hold cryptocurrencies. The law recognizes the commodity attributes of virtual currencies. The claims process is settled in US dollars. Although foreign exchange controls limit the amount of US dollars that residents of mainland China can receive each year, they are allowed to hold US dollars abroad.

How should Chinese creditors collect debts?

When using legal means, one must also consider the cost and benefits. For large creditors who have suffered losses in the tens of millions of dollars at FTX, the cost and benefits of using legal means may be comparable; however, for users with amounts less than $50,000, the compensation funds seem not worth it compared to the funds, time, and effort spent on legal actions.

Should we really just watch our money flow into someone else's pocket? Of course not. In fact, there are already many third-party platforms in the market that provide debt sale services for FTX creditors, such as RootData, claims market, ftxcreditor, and Xclaim. To gain a more detailed understanding of how FTX creditors in China can "collect debts," Odaily reached out to Loners Liu, the head of FTX creditor solutions at RootData, to learn more about the situation:

RootData's main business is a financing information platform, and it also provides FTX debt sale services for Chinese users. So far, it has successfully handled over 1,000 cases, assisting in processing debt amounts exceeding 300 million USD. Loners Liu stated, "You can think of us as a real estate agency like Lianjia; we help Chinese creditors sell their debts at a discounted price (one-time sale, rather than in batches, etc.), or we can also help them manage their debts."

RootData currently charges a service fee of 1-2% for this service, and it provides the following four solutions to help Chinese users handle FTX claims:

• Sell debt rights;
• Transfer the creditor's rights to entities located outside of China;
• Transfer the debt rights in the name of trustees, banks, or other entities outside of China;
• Change residence;

If you are selling the debt rights, you first need to log in to claims.ftx.com to confirm that KYC is passed, then both the buyer and seller need to schedule a video conference, log in to the backend to verify and sign the contract, and finally complete the transfer.

"Previously, some people were hesitant about whether to take the initiative to handle their claims, but in the past few days, after the news came out that Chinese users' claims against FTX were restricted, many people have come to inquire." Loners Liu answered my questions while responding to inquiries from creditors.

"However, according to our estimates, among Chinese creditors, there may be only a little over 1,000 users with amounts exceeding $50,000," Loners Liu said, indicating that many large clients have already dealt with their debts through various channels.

From the perspective of the affected users, waiting for years without receiving any money is like a bolt from the blue. The 45-day appeal period given by the creditor representatives, combined with the headaches of cross-border compensation rights and their inefficient handling, delivers another heavy blow. At this moment, if a certain amount can be deducted (bond transfer rate + a small handling fee) to achieve partial recovery of funds, it can be considered a good solution amidst the difficulties.

However, if one stubbornly adheres to legal principles and strictly protects their rights, facing bankruptcy lawyer groups that earn exorbitant fees and hold the discourse power of the rules, Chinese creditors truly have no place to seek assistance. In the rapidly changing and tumultuous world of cryptocurrency, the FTX collapse seems far away now, but the scars left on all parties involved have yet to heal. The most unbearable scene is when the cryptocurrencies that once carried dreams of wealth ultimately turn into US dollars that fill the pockets of legal teams.