Bankruptcy Estate Flags Legal Risks in Cross-Border Distributions

FTX's bankruptcy administrators have petitioned a U.S. court to suspend cryptocurrency repayments to creditors in 49 jurisdictions with ambiguous or prohibitive digital asset regulations. The July 2 filing with Delaware's Bankruptcy Court reveals the estate's concerns about potential violations of local laws spanning from China to Saudi Arabia.

Regulatory Minefield Across Multiple Continents

The motion identifies mainland China as particularly problematic, accounting for 82% of affected claims' value among restricted territories. Other notable jurisdictions include Russia, Iran, and Egypt, where crypto transactions face explicit bans. The document warns that improper distributions could trigger criminal penalties including imprisonment for trust officers.

【Key Data】The estate holds undisclosed amounts for 49 nations collectively representing billions in claims, with procedures developed to evaluate each case individually rather than imposing blanket prohibitions.

China's Paradoxical Crypto Landscape

While China maintains strict prohibitions on crypto trading, the filing acknowledges no explicit ban on digital asset ownership exists. This legal gray area contrasts with neighboring Hong Kong's progressive stance, where regulators have approved crypto derivatives and ETFs.

——"When distributing tokens in bankruptcy, significant legal uncertainty remains," noted Aaron Brogan of Brogan Law, suggesting the estate's caution reflects prudent risk management——

Balancing Compliance With Creditor Rights

The proposed freeze isn't absolute - the trust will maintain funds in escrow while seeking jurisdictional clarity. Administrators emphasized this approach aligns with their bankruptcy plan's implementation, allowing potential future distributions where legally permissible.

Global Ripple Effects

This development highlights growing tensions between cross-border bankruptcy proceedings and fragmented crypto regulations. The estate's motion comes as multiple nations reassess their digital asset frameworks, with some like Ukraine and Saudi Arabia reportedly considering regulatory updates.

【Procedural Timeline】Court approval for the freeze request remains pending, with affected creditors expected to receive case-specific updates through established bankruptcy communication channels.