FTX has withdrawn its controversial motion seeking to implement a "restricted jurisdiction" procedure that could have led to the forfeiture of customer claims in certain countries, a reversal that marks a win for creditors of the collapsed exchange.
The motion, which is part of its Chapter 11 plan, sought court approval to establish a "Restricted Jurisdiction Procedure" for evaluating compliance in 49 jurisdictions where repayments may be potentially challenging due to local regulations.
These jurisdictions included China, Russia, Ukraine, Pakistan, and Saudi Arabia, where claims totaled approximately $800 million, representing about 5% of the estate's estimated $16 billion in potential distributions. China accounted for 82% of that value.
FTX had proposed retaining local counsel in each jurisdiction to evaluate the feasibility of compliant payouts. If a compliant process was deemed impossible, the jurisdiction would have been designated as restricted after a 45-day objection period. Claims in unresolved restrictions would then have been forfeited and returned to the trust for reallocation, had the proposal been authorized.
This motion had drawn opposition from creditors, notably a group of over 300 Chinese claimants represented by Weiwei Ji, who filed an objection in the Delaware court. Ji, a Singapore tax resident classified as Chinese due to his passport, argued the proposal lacked factual or legal basis for designating China as restricted.
Monday's withdrawal of the motion, however, was made without prejudice, meaning the trust may refile the motion at a later date with notice under applicable rules.
'Never insolvent'
Meanwhile, Sam Bankman-Fried, the convicted founder of FTX, is scheduled to appear at an appeal hearing in New York on Tuesday.
Bankman-Fried last week published a month-old document claiming that FTX and sister hedge fund Alameda Research were "never insolvent." The former CEO and his team put the blame on the bankruptcy counsel for allegedly misrepresenting the company's financial status, shutting it down and underselling its assets when it had enough money to overcome the liquidity crisis it faced in 2022.
FTX filed for bankruptcy in November 2022 after "secret backdoor" dealings with Alameda were exposed and subsequently triggered a mass bank run. A month later, Bankman-Fried was arrested, and a year later he was convicted on multiple counts of fraud and conspiracy for stealing billions of dollars in customer funds from FTX.
Bankman-Fried and his family have repeatedly claimed that the FTX co-founder was wrongfully convicted, and are seeking clemency from President Donald Trump, who has pardoned Silk Road creator Ross Ulbricht and Binance Co-founder Changpeng Zhao.