FTX Debt Compensation Update: Users in Some Regions May Lose Compensation Rights

Recently, the FTX creditor representative released the latest progress on debt compensation. According to the latest plan, users with amounts below $50,000 will receive 120% compensation in February 2025, while users with amounts exceeding $50,000 will receive 72.5% compensation in May 2025. Subsequent compensations are expected to be distributed in October and December 2026, as well as in 2027. For large users who have already received 72.5% compensation, an additional 27.5% will be provided in the future, ultimately achieving 100% compensation.

However, just as the creditors were looking forward to compensation, a worrying message came through. The creditors' representative stated that creditors from 49 jurisdictions, including China, might lose their right to claim. The claims from creditors in these regions account for about 5% of the total funds, valued at approximately $825 million, of which 82% belongs to Chinese creditors, about $676.5 million.

Although FTX stated that it would seek legal advice to attempt to allocate to these restricted areas, claims will be disputed if it is determined that the user belongs to a restricted area. Users have 45 days to raise objections, but if the issue is not resolved, users will completely lose their allocation rights, and their compensation shares will be forfeited and returned to the FTX liquidation trust for distribution to legitimate creditors in other regions.

This news has sparked strong dissatisfaction among affected users. Some users have stated that they have contacted a lawyer in New York and are calling for more people to take action. They believe that although China does not support cryptocurrency trading, the law recognizes the commodity nature of virtual currencies, and Chinese residents are allowed to hold US dollars abroad.

In the face of this dilemma, Chinese creditors can consider several solutions:

1. Sale of Debt Rights
2. Transfer the creditor's rights to overseas entities
3. Transfer of debt rights in the name of offshore trustees, banks, or other entities.
4. Change of residence

Multiple platforms in the market have provided debt sale services for FTX creditors. Taking a certain data platform as an example, they have successfully handled over 1,000 cases, involving a total debt amount exceeding $300 million. The person in charge of the platform stated that the consultation volume has obviously increased in recent days, but in fact, many large clients have already dealt with their debts through various channels.

For affected users, waiting for years only to possibly receive no compensation is undoubtedly a heavy blow. Although transferring claims for a certain amount of loss is not an ideal choice, in the current situation, recovering part of the funds is still a feasible option. However, if one chooses to strictly uphold their rights, the high costs of legal fees and complex legal procedures may pose even greater challenges for creditors in China.

In this long process of claims, the cryptocurrency that once carried dreams of wealth may ultimately flow into the pockets of the legal team in the form of dollars, which is undoubtedly the most regrettable outcome.