• FTX seeks court approval to freeze $500M in payouts.
• 49 jurisdictions flagged, China holds 82% of value.

FTX’s bankruptcy estate has filed a motion seeking to freeze creditor distributions in 49 countries with restrictive or ambiguous crypto laws. On July 2, the estate asked the U.S. Bankruptcy Court in Delaware to approve a hold and review process. This move aims to ensure legal compliance before distributing crypto assets globally. The estate warned that sending funds to these jurisdictions could trigger fines, personal liability, or even criminal charges. These risks stem from local laws banning crypto activity or third-party intermediaries. As a result, the FTX Recovery Trust proposes freezing affected payouts until legal clarity is secured. Among the 49 jurisdictions, China accounts for 82% of the disputed claim value, despite making up just 5% of the total claims. While China bans crypto trading, holding digital assets remains legal. Chinese FTX users are challenging the freeze, arguing they have the right to receive dollar-based payouts offshore.

Upon court approval, the trust will issue a “Restricted Jurisdiction Notice” to affected creditors. Creditors will have at least 45 days to file objections. To do so, they must acknowledge U.S. court authority via a sworn declaration. If unresolved by the distribution record date, disputed funds will return to the estate. Creditor Objections and Legal Ramifications

Failure to file timely objections will result in claim forfeiture. Even creditors who object but lose in court will forfeit their claims. One Chinese user confirmed consulting legal counsel and plans to object through every legal channel. FTX creditor advocate Sunil Kavuri emphasized that the trustee holds final authority unless the court rules otherwise.

FTX initiated its second repayment phase in May, aiming to distribute $5 billion. However, this freeze affects $500 million linked to blocked jurisdictions. The trust will resolve claims individually through legal opinions and court rulings. Distributions will resume only if compliance with local laws is confirmed. Highlighted Crypto News Today
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Sam Bankman-Fried, the founder of the defunct cryptocurrency exchange FTX, has been sentenced to 25 years in prison following his conviction on seven counts of fraud and conspiracy. However, this sentence could be significantly reduced, according to Monday reports.  How FTX Founder’s Sentence Could Be Reduced During the trial, prosecutors detailed how Bankman-Fried and his executives misappropriated customer funds by commingling them with investments from Alameda Research, his hedge fund. This fraudulent scheme was estimated to amount to a staggering $11 billion, leading to widespread financial losses for investors. Bankman-Fried was initially held at the Metropolitan Detention Center in Brooklyn, notorious for its harsh conditions, before being transferred to FCI-Terminal Island in California, a low-security prison housing around 850 male inmates.  According to the Bureau of Prisons (BOP), he is projected to be released on December 14, 2044, which could be as little as 21 years into his sentence if he qualifies for “Good Conduct Time,” potentially allowing him to earn reductions based on his behavior and participation in prison programs. $5 Billion Distribution Expected In Days The legal saga surrounding Bankman-Fried began when he had his bail revoked two months prior to his trial, after he allegedly revealed private writings of his former girlfriend, Caroline Ellison, to a journalist.  Ellison, who served as CEO of Alameda Research, was sentenced to two years in prison for her role in the fraudulent activities but had her sentence reduced by about six months, with an expected release in May 2026. As Bankman-Fried’s legal troubles unfold, the fallout from FTX continues to impact the cryptocurrency landscape. The exchange, now under the leadership of John J. Ray III, is actively working to recover lost funds for investors impacted by its collapse.  As reported by Bitcoinist last week, FTX announced plans to distribute over $5 billion to creditors as part of its Second Distribution, scheduled for May 30. This significant distribution aims to assist eligible creditors who meet specific pre-distribution requirements. John J. Ray III, the Plan Administrator of the FTX Recovery Trust, emphasized the importance of this distribution, calling it a “pivotal milestone” in the recovery efforts. He noted the unprecedented scope of FTX’s creditor base and highlighted the success of the recovery team in navigating this complex process.  Funds from the distribution are expected to reach eligible accounts within 1 to 3 business days after the distribution date, processed through selected service providers such as BitGo or Kraken. At the time of writing, the exchange’s native token, FTT, trades at $1.14, ranging between $0.73 and $1.5 for the past two months. Year-to-date (YTD), the token registers a 27% price drop, with the price 97% below its all-time high.  Featured image from DALL-E, chart from TradingView.com