In July, the motion submitted by the FTX bankruptcy liquidation committee to the bankruptcy court in Delaware, USA, sent shockwaves through the global crypto community: the claims eligibility of users from 49 "restricted countries" may be completely revoked, with Chinese users holding $380 million in claims accounting for 82% of the total restricted claims, becoming the biggest victims.
According to the motion, FTX will handle these claims in two steps: first, the liquidators will hire lawyers to assess whether assets can be allocated to these jurisdictions; if the legal opinion concludes that compensation is not possible, the relevant funds will be transferred to a liquidation trust account for "legal confiscation"—this means that Chinese users may not only receive nothing, but their assets could even be turned into "confiscated funds" for the trust.
FTX's proposed "regional exclusion" plan is unprecedented in the history of bankruptcy liquidation. Unlike conventional debt handling, its core lies in systematically depriving users from specific countries of their right to claim based on the argument that "local laws prohibit cryptocurrency."
The fatal design of the "two-step" process: First, the trust institution unilaterally hires lawyers from 49 countries to provide legal opinions; second, if the opinion denies the possibility of compensation, the claims are directly transferred to the trust. Once the motion is passed, Chinese users will completely lose their initiative—lawyers are selected by the liquidators, and their understanding of Chinese crypto policy may be one-sided or even biased.
The lack of historical precedent: Creditor representative Will stated in an interview: "I have not seen a practice that completely excludes Chinese creditors and does not grant any claims eligibility in other cases." The handling of user assets in a 'confiscatory' manner has never occurred in history.
Even more questionable is the profit motive behind the motion. Some distressed asset funds have pressured Chinese creditors to sell their claims at a discount, claiming that "as long as 5% of Chinese claims are excluded, the remaining 95% will support it." This operation has been criticized as an arbitrage game of "low-price acquisition + full compensation."
The FTX liquidation team refused compensation on the grounds of "China banning cryptocurrency trading," but this reason is legally flawed. Several creditors and legal experts pointed out that this decision lacks a solid legal basis and may even violate U.S. bankruptcy law.
There are no obstacles to payment methods: FTX compensation can be made in U.S. dollars or stablecoins, and Chinese users can receive wire transfers through Hong Kong accounts. In the Celsius bankruptcy case, a U.S. court successfully paid U.S. dollar compensation to Chinese creditors, proving the technical feasibility.
Chinese law does not prohibit individuals from holding crypto assets: Courts at all levels in China recognize that Bitcoin and other cryptocurrencies fall under the property category protected by the Civil Code. Hong Kong has established a compliant crypto regulatory system, and Macau has not prohibited individuals from holding coins. The "policy texts" cited by FTX have no legal binding force.
However, this exclusion is highly questionable from the perspectives of reason and legal fairness. For ordinary Chinese users who merely stored funds on the FTX platform and did not engage in any illegal activities, their connection to cryptocurrency trading is solely based on trust in the platform. These users are not equivalent to those who actively violate regulations in cryptocurrency trading, yet they must bear the consequences of being unable to receive compensation due to the platform's "one-size-fits-all" policy, which is clearly unfair. FTX's actions resemble a means of shirking responsibility, using the complex cryptocurrency policy environment of countries like China as a shield while ignoring the legitimate rights and interests of many innocent users behind it.
The FTX liquidation process superficially appears to be debt handling, but in reality, it has evolved into a wealth plundering led by Wall Street elites. The leader, John J. Ray III, known as a "corporate corpse handler" who previously dealt with the Enron bankruptcy case, is now leading the law firm Sullivan & Cromwell (S&C) in a more frenzied money-making endeavor.
Exorbitant legal fees devour creditor assets: S&C partners charge up to $2,000 per hour, while John Ray himself charges $1,300 per hour. By early 2025, the legal service fees claimed by this team had reached $249 million—this money should belong to all creditors.
High-quality assets are sold at a loss, evaporating billions in wealth: The liquidation team sold FTX's historical investment portfolio at prices far below their value, raising suspicions of interest transfer:
AI star project Cursor: FTX invested $200,000 in the seed round, with a valuation of $9 billion, yet it was sold at the original price, missing out on at least $500 million in profits;
Public chain SUI: Once valued at $4.6 billion, it was sold for only $96 million, equivalent to 2% of its actual value;
AI giant Anthropic: An 8% stake was sold for $1.3 billion, and the following year its valuation soared to $61.5 billion, missing out on $3.7 billion in profits.
Industry analysis indicates that FTX lost at least tens of billions in potential appreciation during asset disposal, with the buyers mostly being institutions closely related to the liquidation team, such as Galaxy Trading and Pantera Capital. Ironically, the liquidation team embedded a "consultant liability waiver" in the new plan, making it nearly impossible for creditors to hold them accountable.
Chinese creditors excluded from the compensation system are facing a triple dilemma of narrow channels for rights protection, time constraints, and high costs, forming a stark contrast with users from other regions.
The high threshold for self-rescue actions: Opposing the motion requires submitting written materials to the U.S. bankruptcy court by July 15, and the process is extremely strict:
Materials must be mailed in paper form to the presiding judge, the FTX legal team (from two law firms in New York and locally), and the U.S. Trustee's Office (UST);
International express delivery from mainland China takes 4-5 days, with July 9 being the last mailing deadline; late submissions will be invalid.
Systemic exclusion of class action lawsuits: Creditors from the U.S., Japan, South Korea, and other countries can initiate class action lawsuits with the help of local lawyers. However, due to policy restrictions, Chinese users find it difficult to form rights protection alliances and cannot rely on local judicial support, falling into a desperate situation of individual confrontation against capital giants.
When the FTX liquidation team marks the $380 million Chinese claims as "assets pending confiscation" in the name of compliance, and when John Ray's legal team divides creditor assets at a rate of $33 per minute, this bankruptcy liquidation has shed its legal facade, revealing the essence of capital distribution.
"That group of lawyers, hailed as the 'professional liquidation team,' decides the fate of billions in assets with a few lines of text, yet no one leaves ordinary investors with a chance to turn the tables." The harsh laws of the crypto world are once again revealed: choosing a platform is equivalent to choosing a fate. The FTX liquidation committee is transforming the ruins of a crypto empire into a "legal gold mine" for Wall Street with astonishing efficiency. They wield the "legal opinion" scepter to drive Chinese creditors away from the altar of compensation, yet forget that the Cursor shares, Anthropic equity, and the "confiscated" $380 million in claims they sold off cheaply were all built on the trust of global users.
Related: FTX bankruptcy estate manager requests the court to freeze distribution payments to "restricted" countries.
Original article: “FTX liquidation exposes 'regional discrimination': $380 million Chinese claims may face 'legal confiscation', who is behind the pie division?”
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