FTX Bankruptcy Compensation Plan Launched, Users from Some Countries Face Difficulties

Recently, the bankruptcy compensation plan of the once highly regarded cryptocurrency exchange FTX has finally entered the execution phase. As one of the largest bankruptcy cases in the history of cryptocurrencies, the liquidation process of FTX has garnered significant attention from global investors.

On the 18th of this month, FTX officially launched the first round of compensation. According to the established plan, users claiming amounts not exceeding $50,000 will be prioritized for compensation, with the compensation amount being approximately 119% of the cryptocurrency price in November 2022. These users account for 98% of the total user base. It has been reported that the first batch of $800 million has been paid to 162,000 accounts, and the remaining funds will be distributed gradually.

However, just as the compensation work was progressing smoothly, a representative of FTX creditors announced that users from China, Russia, Ukraine, Egypt, and Nigeria would not be able to participate in this bankruptcy distribution. This decision has drawn widespread attention, especially considering that users from mainland China account for 8% of the total number of FTX users, involving a large number of people and significant amounts.

There has not yet been an official explanation for the reasons behind the inability to participate in the allocation. However, from a legal and financial regulatory perspective, this decision may be related to the following factors:

1. Jurisdiction and compliance risks: China, Egypt, and Nigeria adopt a prohibitive regulatory model for virtual assets. These countries view virtual currency-related activities as illegal financial activities, which are not protected by law. If FTX compensates users from these countries, it may face significant compliance risks.

2. International Financial Sanctions: Russia has been excluded from the SWIFT (Society for Worldwide Interbank Financial Telecommunication) system, making cross-border funds payment and settlement extremely difficult. Even if FTX decides to compensate Russian users, it will be challenging to resolve the payment issues in the short term.

3. Financial Controls During Wartime: Due to the war, Ukraine has implemented strict financial control policies, and the approval for large cross-border capital flows is essentially stagnant, which directly affects the possibility of FTX compensating Ukrainian users.

For users in mainland China, although participation in compensation is currently not possible, the situation is not entirely without hope. In the future, the FTX liquidation team may consider establishing a special liquidation channel or using stablecoins for online compensation. However, the implementation of these solutions still needs to overcome many legal and regulatory obstacles.

Under the current circumstances, the only thing users in mainland China can do is wait patiently. Solving this issue requires coordination and cooperation among regulatory agencies in various countries, as well as adjustments to the international financial regulatory framework. Although the road is long, there is still the possibility of achieving fair compensation through innovative methods.