FTX, the collapsed cryptocurrency exchange, withdrew a controversial plan this Tuesday that sought to classify nearly $800 million in customer claims from 49 countries as “restricted,” potentially subjecting them to forfeiture.
The FTX Recovery Trust filed a formal notice of withdrawal with the Delaware bankruptcy court, reversing a proposal that had generated strong opposition from creditor groups, particularly in China, which accounted for the majority of the affected claims.
FTX’s initial motion requested the court’s approval of a “Restricted Jurisdiction Procedure.” The goal was to hire local lawyers in the 49 jurisdictions to determine if local laws or government restrictions made it difficult to compensate users.
If it was discovered that the payment violated local laws, users in those regions would automatically lose their reimbursement rights, and their funds would be distributed among other creditors. This part of the FTX bankruptcy plan was seen as highly discriminatory by those affected.
Strong Creditor Opposition Halts FTX’s Plan
The proposal sparked an immediate backlash. International customers argued that the plan was unfair, as they would be punished solely for their location, adding to the large losses already suffered.
Weiwei Ji, an investor who led 300 Chinese claimants, filed a formal objection, arguing that FTX had no solid basis for including China on the list and that this would set a dangerous precedent.
The withdrawal of the motion has been met with relief by creditors, who feel their concerns are finally being addressed. It also suggests that FTX is seeking to reduce new legal conflicts. Many creditors hope this step will speed up future decisions regarding asset recovery.
Background on Sam Bankman-Fried's Appeal
Meanwhile, FTX founder Sam Bankman-Fried is preparing for his appeal hearing in New York to challenge his fraud conviction. Bankman-Fried maintains that FTX and Alameda Research were not insolvent when the company collapsed in 2022, accusing bankruptcy lawyers of exaggerating financial problems and liquidating valuable assets at prices that were too low.
However, legal experts and former employees refute this, citing the billions of dollars in missing funds and transfers of customer funds to Alameda.
The information presented in this article is for informational purposes only and should not be interpreted as investment advice. The cryptocurrency market is highly volatile and may involve significant risks. We recommend conducting your own analysis.