FTX Estate Withdraws Motion to Restrict Payouts in Certain Countries, but May Refile Later
The bankruptcy estate of the collapsed cryptocurrency exchange FTX has formally withdrawn its controversial motion that aimed to restrict creditor payouts in nearly 50 countries, including China, Russia, Saudi Arabia, and Ukraine. The decision to rescind the motion, at least for now, comes after a wave of opposition from creditors but leaves open the possibility that the issue could resurface.
The FTX Recovery Trust, which oversees the distribution of assets to creditors following the exchange’s dramatic collapse in 2022, submitted a formal notice on Monday confirming the withdrawal of the motion without prejudice. This legal term means the Trust retains the right to refile the motion in the future if circumstances change or if it deems it necessary.
Originally filed in early July, the motion had sought court approval to implement “restricted jurisdiction procedures,” which would have frozen or delayed payments to creditors in jurisdictions with unclear or restrictive laws regarding digital assets. The proposed list included 49 countries and raised immediate concerns among stakeholders.
One of the primary reasons cited for the initial motion was the lack of regulatory clarity in certain countries, which could pose legal or logistical risks to the distribution process. However, the backlash from creditors was swift and intense — more than 70 formal objections were submitted to the bankruptcy court in a matter of weeks.
Among those speaking out was creditor advocate Weiwei Ji, known publicly as Will, who emphasized that while the withdrawal marks a temporary victory, creditors should remain cautious. “We must continue to act collectively. Until compensation is actually received, it’s too early to celebrate,” Ji wrote in a social media post.
The sentiment was echoed by Sunil Kavuri, another high-profile creditor representative, who warned that even with distributions proceeding, the form of repayment could leave many short-changed. He pointed out that while the FTX estate has proposed a 143% repayment in fiat currency, this does not reflect the value of crypto assets held at the time of the exchange’s collapse. “FTX creditors are not whole,” Kavuri stated, highlighting the difference between fiat and crypto valuations.
The now-withdrawn motion had broader implications beyond the FTX case. Critics feared it could set a precedent for future crypto bankruptcies, effectively allowing bankruptcy trustees to unilaterally exclude or delay creditors based on geopolitical or regulatory concerns. “This is not just about FTX. It sets a dangerous precedent for the entire crypto ecosystem,” Ji warned earlier in July.
Despite the withdrawal, the Recovery Trust made it clear that the issue is not entirely off the table. “If and when the FTX Recovery Trust seeks to renew the relief requested, a new motion will be filed in accordance with applicable rules,” the latest filing stated, suggesting the possibility of reintroducing the restrictions under different terms.
The $380 million in claims from Chinese creditors alone underscores the high stakes involved. Excluding such a significant creditor base could have led not only to legal challenges but also to reputational damage for the already embattled estate.
The setback for the Trust comes amid wider concerns over how FTX’s remaining assets will be distributed. With billions in claims still unresolved, and a large portion of the estate’s holdings converted into fiat, many creditors fear they will recover only a fraction of their original crypto investments.
Adding to the complexity, the broader regulatory environment remains uncertain. While some nations are moving to tighten crypto regulations, others continue to operate in a legal grey area. These disparities make global asset distribution particularly difficult for bankruptcy estates like FTX’s, which served a worldwide user base.
Another layer to the controversy is the emotional and financial toll on individual creditors, many of whom lost life savings or retirement funds in the collapse. For these individuals, news of the withdrawn motion offers a glimmer of hope, but the path to restitution remains long and uncertain.
The case also serves as a cautionary tale for crypto investors and institutions alike. The lack of legal clarity and standardized global frameworks means that future collapses could face similar complications, especially when assets are distributed across borders.
The FTX saga continues to ripple through the crypto world, exposing the fragility of trust in centralized exchanges and the importance of legal safeguards for users. As the bankruptcy proceedings progress, stakeholders will be watching closely for any sign that the Trust may reintroduce the motion or propose alternative procedures that could again impact international creditors.
Looking forward, experts suggest the FTX case may influence how future crypto bankruptcies are handled, particularly in terms of cross-border legal coordination and creditor rights. Calls for international regulatory alignment are growing louder, as are demands for clearer rules around crypto asset classification and distribution during insolvency.
In sum, while the withdrawal of the motion is a short-term relief for many of FTX’s global creditors, much remains unresolved. The bankruptcy estate has left the door open to future legal actions, and the broader question of how to fairly and efficiently resolve multinational crypto bankruptcies is still unanswered. For creditors, the message is clear: remain engaged, stay informed, and prepare for a long road ahead.