FTX Estate Withdraws Motion to Restrict Foreign Creditor Payouts: What's Next?

The bankruptcy estate of the defunct crypto exchange FTX has abandoned its motion seeking to limit creditor distributions to “potentially restricted foreign jurisdictions.” The FTX Recovery Trust filed a notice on Monday withdrawing its motion for an order supporting the confirmed plan, which would have authorized the trust to implement restricted jurisdiction procedures in regions like China. “If and when the FTX Recovery Trust seeks to renew the relief requested in the Motion, the FTX Recovery Trust shall file a motion and provide notice in accordance with the applicable rules,” the notice stated. The motion was withdrawn without prejudice. The trust had initially filed the motion in early July, seeking court authorization to freeze payouts to creditors in 49 countries including China, Saudi Arabia, Russia, and Ukraine, citing unclear or restrictive local cryptocurrency regulations.

Creditors Urge Caution: Victory is Not Yet Assured

While the withdrawal is a significant step forward for affected FTX creditors, some are urging caution. “This is a victory for all potentially affected creditors. But until you receive the compensation you’re owed, stay vigilant and keep acting together,” wrote Weiwei Ji, a creditor known as Will on X. The estate's decision to withdraw the motion followed considerable pushback from creditors, with at least 70 objections filed in bankruptcy court within weeks of the motion’s initial submission. In July, Ji cautioned that court approval of the FTX estate’s motion regarding restricted countries could set a concerning precedent for future crypto bankruptcies.

A Potentially Dangerous Precedent Avoided

“This motion isn’t just about FTX creditors. It sets a dangerous precedent that could destroy trust in the global crypto ecosystem,” Ji wrote previously. Sunil Kavuri, a prominent FTX creditor representative, recently warned that the value of FTX distributions might be significantly less than many creditors anticipate, especially considering that payouts are being made in fiat currency rather than cryptocurrencies. “FTX creditors are not whole,” Kavuri stated, adding that the FTX estate’s planned 143% fiat repayment does not adequately compensate for losses measured in crypto-denominated terms. Magazine: China officially hates stablecoins, DBS trades Bitcoin options: Asia Express