The crypto exchange FTX, currently embroiled in Chapter 11 bankruptcy proceedings, has backed down from a major motion against its Creditors. FTX has withdrawn a controversial proposal that sought to limit or forfeit the claims of customers located in 49 jurisdictions, including China, Russia, and Ukraine. This decision is considered a significant win for FTX creditors globally, particularly those from the Asia-Pacific region.
The Essence and Intent of the Original Motion
The “Restricted Jurisdiction” Procedure
The motion was initially proposed as part of FTX’s Chapter 11 bankruptcy plan. FTX argued that local laws and regulations would make it overly difficult to distribute payments to customers in certain countries.
- Listed Countries: The list included 49 jurisdictions, such as China, Russia, Ukraine, Pakistan, and Saudi Arabia.
- Value of Claims: The total value of claims in these restricted areas amounted to approximately $800 million. This represents about 5% of the total $16 billion FTX expects to distribute.
- China’s Role: Approximately 82% of this $800 million in claims was attributed to China.
The Forfeiture Plan
Had FTX’s proposal been approved, it would have followed this process:
- Local Compliance Review: Local legal counsel would have been hired to assess the feasibility of payments in each country.
- Restriction Announcement: If compliance was deemed impossible, the jurisdiction would be declared restricted after a 45-day objection period.
- Forfeiture: Claims in the restricted areas would have been forfeited and transferred back to a Trust for reallocation among other creditors.
Creditor Opposition and the Withdrawal
Opposition from Chinese Creditors
The resolution immediately sparked fierce opposition among the affected customers.
- Legal Action: A major group of over 300 Chinese claimants, represented by Weiwei Ji, filed a strong objection with the Delaware Court.
- Argument: Ji pointed out that despite being a tax-paying resident of Singapore, she was categorized as a Chinese national based on her passport. The group argued there was no legal or factual basis to designate China as a restricted jurisdiction. They stressed that this would create an Arbitrary Segregation among creditors.
FTX’s Concession
On Monday (November 3, 2025), FTX withdrew the motion. This decision was made due to the legal and political pressure from the creditors.
- Reason for Optimism: The withdrawal was made “without prejudice.” This means the FTX Trust retains the right to file a similar motion later after providing notice under applicable rules. Nevertheless, for now, it is a significant temporary relief for the creditors.
Context and SBF’s Controversial Claims
This legal maneuver by FTX draws further scrutiny alongside recent news concerning its founder, Sam Bankman-Fried (SBF).
- SBF’s Appeal: SBF, who was convicted of fraud and conspiracy charges, is scheduled to appear for his appeal hearing in New York on Tuesday.
- “Never Insolvent” Claim: Last week, SBF released a document arguing that FTX and Alameda Research were “never insolvent” and had the necessary funds to overcome the Liquidity Crisis they faced in 2022. He accused the bankruptcy advisors of misrepresenting the firm’s financial status and selling assets at reduced prices.
- Pardon Plea: SBF and his family are currently seeking a pardon from President Donald Trump, who recently granted pardons to CZ and Ross Ulbricht. In this context, FTX’s attempt to forfeit creditors’ money in restricted areas raised questions about the credibility of the recovery efforts.
Conclusion
FTX’s withdrawal represents a favorable turnaround for global creditors. It underscores the significant influence creditors and their legal representatives wield in FTX’s recovery processes. However, the $800 million in claims may still be subject to a future legal battle, as FTX could refile the motion later.
