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FTX has abandoned his controversial proposal to limit repayments in dozens of countries after strong opposition from creditors, especially those in China.
Key tips:
- FTX withdrew its plan to limit refunds in 49 jurisdictions after the backlash from creditors, particularly those in China.
- The proposal sought to exclude about $800 million in claims if local compliance was deemed impossible.
- The reversal marks a major victory for affected creditors as founder Sam Bankman-Fried continues to contest claims that FTX was insolvent.
The motion, filed as part of FTX’s Chapter 11 bankruptcy proceedings, sought to create a “Limited Jurisdiction Proceeding” that would have allowed the estate to retain or even waive claims in 49 jurisdictions deemed too complex for repayment due to local laws.
FTX Faces Backlash Over Plan to Settle $800M in Claims, Majority from China
These jurisdictions include China, Russia, Ukraine, Pakistan and Saudi Arabia, covering approximately $800 million in claims, about 5% of FTX’s expected $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 these jurisdictions could be forfeited and redistributed among other creditors after a 45-day objection window.
The proposal drew immediate backlash from creditor groups. More than 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 reasoning to classify China as a restricted jurisdiction, calling the plan discriminatory and against the principles of bankruptcy equity.
Facing mounting pressure, FTX withdrew the motion on Monday “without prejudice,” leaving open the possibility of revising the request later.
For now, however, the reversal is seen as a symbolic victory for affected creditors, many of whom feared they would be excluded from repayment altogether.
The development comes as Sam Bankman-Fried (SBF), the convicted FTX founder, prepares to appear first the United States 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, recently resurfaced in the headlines after releasing a document arguing that FTX and Alameda Research were never “insolvent.”
He accused the bankruptcy team of falsifying the financial health of the exchange and of “uselessly liquidating valuable assets.”
His family has since asked for clemency from President Donald Trump, who 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 biggest crashes in crypto history.
Sam Bankman-Fried says FTX was never insolvent
As reported, Bankman-Fried has restarted the debate about the collapse of FTX, pretending that the exchange had always been good enough to fully refund customers.
In a Sept. 30 filing, the former CEO argued that the $8 billion shortfall cited during the bankruptcy “never went away,” and that customer recoveries of up to 143% prove FTX suffered a liquidity crunch, not insolvency.
“We have always been good enough 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 argued that FTX and Alameda’s assets exceeded liabilities until mid-2022, and he said financing agreements were in place before the bankruptcy filing.
His document disputes the first reports of insolvency of the bankruptcy team and blames its management for the erosion of value and lengthening of repayments of creditors.
