FTX Recovery Trust Withdraws Motion to Limit Payouts for Chinese Creditors

• FTX Recovery Trust withdraws motion: The trust abandoned plans to limit payouts to 49 potentially restricted jurisdictions, including China, Saudi Arabia, Russia, and Ukraine.

• Creditor objections played a key role, with over 70 filings highlighting risks to global crypto trust and future bankruptcies.

• China holds approximately $380 million in FTX claims; the withdrawal paves the way for unrestricted distributions, though fiat payouts may not fully compensate crypto losses, estimated at 143% recovery in dollar terms.

Discover how the FTX Recovery Trust’s withdrawal of its motion impacts creditor payouts in restricted countries like China. Stay informed on crypto bankruptcy updates and what it means for global investors—read more now.

What is the FTX Recovery Trust’s Withdrawal of the Restricted Jurisdiction Motion?

The FTX Recovery Trust has officially withdrawn a motion that sought to implement procedures limiting creditor distributions in potentially restricted foreign jurisdictions. Filed in early July, the motion targeted 49 countries, including China, due to unclear or restrictive local cryptocurrency regulations. This reversal, announced on Monday, comes after significant opposition from creditors and allows the trust to proceed with broader payout plans without immediate geographic barriers.

The decision underscores the challenges in navigating international bankruptcy proceedings for crypto assets. Creditors in affected regions can now anticipate distributions under the confirmed plan, though the trust reserves the right to revisit restrictions if needed through future filings.

How Will This Impact Creditors in Countries Like China?

The withdrawal directly benefits creditors in jurisdictions such as China, where approximately $380 million in claims are held, by removing potential blocks on receiving repayments. According to bankruptcy court records, the FTX estate faced over 70 objections shortly after filing the motion, citing concerns over setting precedents that could erode trust in the global cryptocurrency ecosystem.

Experts in cryptocurrency bankruptcy, including representatives from affected creditor groups, emphasize that this move prevents discriminatory practices in asset distribution. For instance, data from the FTX proceedings indicate that while the estate plans 143% repayments in fiat currency, this may not fully address losses incurred in volatile cryptocurrencies during the 2022 collapse. Short sentences highlight the key: No freezes on payouts. Increased access for international claimants. Ongoing vigilance required from creditors.

The FTX Recovery Trust stated in its notice that the motion is withdrawn without prejudice, meaning it could be refiled later if regulatory hurdles intensify. Creditor advocate Sunil Kavuri, speaking on behalf of impacted parties, noted that while this is progress, the fiat-based recovery undervalues original crypto holdings, potentially leaving many not “whole” in terms of market appreciation since the bankruptcy.

Frequently Asked Questions

What prompted the FTX Recovery Trust to withdraw the motion on restricted jurisdictions?

The trust withdrew the motion due to intense pushback from creditors, including at least 70 objections filed in court. These highlighted risks of limiting access in countries like China and warned of broader implications for crypto bankruptcy standards and global trust in digital assets.

Will FTX creditors in China now receive their full payouts without restrictions?

Yes, the withdrawal clears the path for distributions to creditors in China and other listed countries under the confirmed plan. However, payouts are in fiat, aiming for 143% recovery on claims, though this may not reflect crypto market gains; creditors should monitor ongoing proceedings for any future changes.

Key Takeaways

• Broader Access to Payouts: The motion’s withdrawal ensures creditors in 49 countries, including those with $380 million in Chinese claims, can receive distributions without immediate jurisdictional barriers.
• Creditor Advocacy Wins: Over 70 objections demonstrated unified resistance, preventing a precedent that could harm future crypto recoveries and global ecosystem trust.
• Fiat Limitations Persist: While 143% fiat repayments are planned, advocates like Sunil Kavuri stress this doesn’t fully compensate for crypto-denominated losses—creditors should evaluate tax and conversion implications.

Source: Sunil Kavuri

Conclusion

The FTX Recovery Trust’s withdrawal of its motion to restrict creditor payouts in potentially restricted jurisdictions like China marks a pivotal shift in the ongoing bankruptcy saga. By addressing creditor concerns over FTX creditor payouts and international access, this decision reinforces fairness in crypto asset distributions. As proceedings advance, stakeholders should remain engaged with updates from the bankruptcy court, preparing for fiat-based recoveries that, while substantial, highlight the enduring complexities of cryptocurrency regulations worldwide. Investors are encouraged to consult legal experts for personalized guidance on claims.

The bankruptcy estate of defunct crypto exchange FTX has abandoned a motion seeking to limit creditor distributions to “potentially restricted foreign jurisdictions.”

The FTX Recovery Trust on Monday filed a notice withdrawing its motion for entry of an order in support of the confirmed plan authorizing it to implement restricted jurisdiction procedures in potentially restricted foreign jurisdictions like China.

“If and when the FTX Recovery Trust seeks to renew the relief requested in the Motion, the FTX Recovery Trust shall file a motion and provide notice in accordance with the applicable rules,” the notice states, adding that the motion has been withdrawn without prejudice.

The trust filed the motion in early July, seeking the court’s authorization to freeze payouts to creditors in 49 countries such as China, Saudi Arabia, Russia and Ukraine, citing unclear or restrictive local crypto laws.

Do not celebrate too early, creditor warns

The withdrawal is a significant win for affected FTX creditors, but some say it’s too early to celebrate.

“This is a victory for all potentially affected creditors. But until you receive the compensation you’re owed, stay vigilant and keep acting together,” Weiwei Ji, a creditor known as Will on X, wrote in a post on Tuesday.

The estate’s decision to withdraw the motion came after intense pushback from creditors, with at least 70 objections filed in bankruptcy court within weeks of the motion’s submission.

Amid the objections in July, Ji warned that court approval of the FTX estate’s motion regarding restricted countries could have set a standard for future crypto bankruptcies.

“This motion isn’t just about FTX creditors. It sets a dangerous precedent that could destroy trust in the global crypto ecosystem,” he wrote at the time.

Sunil Kavuri, a prominent FTX creditor representative, warned on Sunday that the value of FTX distributions may be far less than expected by many, given that the payouts are made in fiat rather than cryptocurrencies.

“FTX creditors are not whole,” he wrote, adding that the FTX estate’s planned 143% fiat repayment doesn’t reflect losses in crypto-denominated terms.