TLDR
- FTX has withdrawn its motion to create a restricted jurisdiction procedure for customer repayments in 49 countries.
- The proposal would have affected approximately $800 million in claims across China, Russia, Ukraine, Pakistan, and Saudi Arabia.
- China accounted for 82% of the total restricted jurisdiction value among the targeted countries.
- Over 300 Chinese claimants filed an objection to the motion through their representative Weiwei Ji in Delaware court.
- The withdrawal was made without prejudice, meaning FTX can refile the motion at a later date with proper notice.
FTX has abandoned its motion to create a restricted jurisdiction procedure for customer repayments. The decision represents a victory for creditors in countries targeted by the proposal. The collapsed exchange filed the withdrawal on Monday without prejudice, allowing potential future submissions.
FTX Drops Plan Affecting $800 Million in Claims
The motion sought court approval to evaluate compliance in 49 jurisdictions with challenging regulatory environments. Countries on the list included China, Russia, Ukraine, Pakistan, and Saudi Arabia. These nations collectively held claims worth approximately $800 million, or 5% of total distributions.
China represented 82% of the restricted jurisdiction value. FTX had planned to hire local counsel in each country to assess compliant payout options. If compliance proved impossible, the jurisdiction would face restriction after a 45-day objection period.
Claims in restricted areas would have been forfeited and returned to the trust. The funds would then be reallocated to other creditors. The proposal sparked opposition from affected claimants seeking their rightful repayments.
Over 300 Chinese claimants filed an objection through representative Weiwei Ji in Delaware court. Ji holds Singapore tax residency but was classified as Chinese due to his passport. He argued the proposal lacked legal or factual grounds for designating China as restricted.
The creditor group contested the motion as part of FTX’s Chapter 11 bankruptcy plan. The withdrawal removes immediate threats to their claims. However, FTX can refile the motion later, provided it gives proper notice under the applicable rules.
The estate is estimated to hold $16 billion in potential distributions for creditors. The restricted jurisdiction procedure would have affected a small portion of total payouts. Creditors in unrestricted countries remain unaffected by the withdrawn proposal.
Bankman-Fried Appeal Hearing Approaches
Sam Bankman-Fried, the convicted founder of FTX, faces an appeal hearing in New York on Tuesday. He published a document last week claiming FTX and Alameda Research were never insolvent. The former CEO blamed bankruptcy counsel for misrepresenting the company’s financial status and underselling assets.
Bankman-Fried argued FTX had sufficient funds to overcome its 2022 liquidity crisis. The exchange filed for bankruptcy in November 2022 after secret dealings with Alameda Research emerged. A mass bank run followed the revelations about improper fund transfers.
Authorities arrested Bankman-Fried in December 2022. A jury convicted him a year later on fraud and conspiracy charges. He was found guilty of stealing billions in customer funds from FTX.
Bankman-Fried and his family maintain his conviction was wrongful. They seek clemency from President Donald Trump. Trump has pardoned Silk Road creator Ross Ulbricht and Binance co-founder Changpeng Zhao.
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