FTX has abandoned its controversial proposal to limit repayments in dozens of countries after sharp opposition from creditors, particularly those in China.
Key Takeaways:
- FTX withdrew its plan to restrict repayments in 49 jurisdictions after backlash from creditors, especially those in China.
- The proposal sought to exclude around $800 million in claims if local compliance was deemed impossible.
- The reversal marks a major win for affected creditors as founder Sam Bankman-Fried continues to contest claims that FTX was insolvent.
The motion, filed as part of FTX’s ongoing Chapter 11 bankruptcy process, sought to create a “Restricted Jurisdiction Procedure” that would have allowed the estate to withhold or even forfeit creditor claims in 49 jurisdictions deemed too complex for repayment due to local laws.
FTX Faces Backlash Over Plan to Exclude $800M in Claims, Majority from China
Those jurisdictions included China, Russia, Ukraine, Pakistan, and Saudi Arabia, covering roughly $800 million in claims, about 5% of FTX’s projected $16 billion in distributions.
China alone represented 82% of that figure.
Under the plan, FTX would have retained local legal counsel to assess whether compliant payments could be made in each region.
If local compliance was deemed impossible, claims from those jurisdictions could have been forfeited and redistributed among other creditors after a 45-day objection window.
The proposal drew immediate backlash from creditor groups. Over 300 Chinese claimants, represented by Singapore-based tax resident Weiwei Ji, filed a formal objection in Delaware bankruptcy court.
Ji argued that the exchange failed to provide a valid legal or factual rationale for classifying China as a restricted jurisdiction, calling the plan discriminatory and contrary to bankruptcy fairness principles.
Facing mounting pressure, FTX withdrew the motion on Monday “without prejudice,” leaving open the possibility of refiling the request later.
For now, however, the reversal is seen as a symbolic win for affected creditors, many of whom had feared being excluded from repayment altogether.
The development comes as Sam Bankman-Fried (SBF), the convicted FTX founder, prepares to appear before the US Court of Appeals for the Second Circuit in New York on Tuesday for his appeal hearing.
Bankman-Fried, who is serving a 25-year sentence for fraud and conspiracy, has recently resurfaced in headlines after publishing a document claiming that FTX and Alameda Research were “never insolvent.”
He accused the bankruptcy team of misrepresenting the exchange’s financial health and “liquidating valuable assets unnecessarily.”
His family has since called for clemency from President Donald Trump, who has previously pardoned Ross Ulbricht and Binance founder Changpeng Zhao.
FTX filed for bankruptcy in November 2022 after revelations of secret fund transfers between the exchange and Alameda triggered a liquidity crisis and one of the largest collapses in crypto history.
Sam Bankman-Fried Claims FTX Was Never Insolvent
As reported, Bankman-Fried has reignited debate over the FTX collapse, claiming the exchange always had enough assets to fully repay customers.
In a September 30 document, the former CEO argued that the $8 billion shortfall cited during bankruptcy “never left,” and that customer recoveries of up to 143% prove FTX suffered a liquidity crunch—not insolvency.
“There have always been enough assets to repay all customers—in full, in kind—both in November 2022, and today,” he wrote.
Bankman-Fried framed the collapse as a “classic bank run,” triggered by panic withdrawals that drained liquidity within days.
He maintained that FTX and Alameda’s assets exceeded liabilities up to mid-2022, and claimed that financing deals were underway before the bankruptcy filing.
His document disputes the bankruptcy team’s early reports of insolvency and blames their management for eroding value and prolonging creditor repayments.
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