FTX Drops Motion to Restrict Creditors in 49 Countries After Global Backlash

The long-running FTX bankruptcy case took another sharp turn this week after the FTX Recovery Trust withdrew its controversial motion to limit creditor payouts in dozens of countries. 

The decision follows months of pressure from international claimants who argued that the proposal unfairly discriminated against users based on geography. While the withdrawal is seen as a major step forward for affected creditors, many warn that repayment challenges and valuation disputes are far from over.

A Reversal After Widespread Opposition

According to a filing made on Monday in the Delaware bankruptcy court, the FTX Recovery Trust officially withdrew its motion seeking to apply “special procedures” for what it described as “restricted foreign jurisdictions.” 

These included countries such as China, Russia, Saudi Arabia, Ukraine, and others where, according to the trust, local crypto laws made repayment uncertain. The motion’s withdrawal was filed “without prejudice,” meaning the trust could reintroduce it at a later time.

The withdrawn proposal had first been submitted in July. It sought court approval to create a process known as the “Restricted Jurisdiction Procedure,” a system that would have delayed or suspended repayments to creditors in 49 countries. FTX argued that the process was necessary to ensure that payments complied with local laws governing digital assets. 

The company planned to hire local legal counsel in each affected country to assess whether crypto or fiat repayments could be made legally. If a jurisdiction was deemed noncompliant and no objection was raised within 45 days, the claim would have been forfeited, and the funds redistributed to other creditors.

The plan quickly became one of the most divisive elements of FTX’s ongoing Chapter 11 proceedings. Creditors across the globe, particularly in China, saw it as an attempt to exclude them from repayment altogether. Within weeks of the motion’s submission, the court received over 70 formal objections, making it one of the most heavily contested filings in the case’s history.

“This is progress, but no one should assume it’s over until payments actually arrive,” wrote Weiwei Ji, one of FTX’s most vocal creditors, in a post following the withdrawal. Ji, a tax resident of Singapore but a Chinese national, has been leading efforts to organize Chinese claimants who feared losing access to their funds entirely.

Under the proposed plan, claims from restricted jurisdictions represented approximately $800 million – roughly 5% of the $16 billion the estate expects to distribute. China alone accounted for 82% of that total. The motion’s withdrawal has therefore been viewed as a significant victory for international creditors, particularly those in regions where regulatory restrictions could have complicated repayment.

Global Creditors Push Back

The reaction from creditors around the world was swift and united. Many saw the proposal as discriminatory, punishing users for living in countries with uncertain crypto regulations rather than for any wrongdoing on their part.

FTX’s initial plan drew widespread criticism for its perceived bias toward U.S. creditors. International claimants noted that nearly all major hearings and negotiations took place in American courts, leaving little room for foreign representation. 

The proposed “Restricted Jurisdiction Procedure” intensified those frustrations, as it could have permanently stripped non-U.S. creditors of repayment rights without clear legal justification.

“This motion isn’t just about FTX creditors,” Ji warned earlier this year. “It sets a dangerous precedent that could destroy trust in the global crypto ecosystem.”

Another creditor advocate, Sunil Kavuri, echoed those concerns but cautioned that the battle is not over. “FTX creditors are not whole,” he said, referring to the estate’s plan to repay claimants 143% in fiat currency. “The repayments sound generous in dollars, but when measured in Bitcoin or Solana terms, the real recovery is far smaller.”

Kavuri and others argue that while the 143% repayment rate may appear favorable on paper, it does not accurately reflect the scale of losses many users suffered. The compensation plan is based on crypto prices at the time of FTX’s bankruptcy filing in November 2022 – when Bitcoin and other major tokens were trading near multi-year lows. 

Since then, prices have surged, meaning that creditors receiving fiat payments today are recovering only a fraction of their assets’ current value.

Despite these ongoing frustrations, many international creditors view the motion’s withdrawal as a necessary first step toward a fairer process. It shows, they say, that their collective objections and coordinated efforts have forced the FTX estate to reconsider its approach.

“This is a victory for all potentially affected creditors. But until you receive the compensation you’re owed, stay vigilant and keep acting together,” Ji wrote on X following the court filing.

Legal observers say the episode highlights deeper tensions between U.S. bankruptcy procedures and the borderless nature of cryptocurrency ownership. Because FTX’s users were located worldwide, the case has continually tested how traditional legal frameworks handle decentralized, multinational financial platforms.

Had the restricted jurisdiction plan gone forward, Ji and other advocates warned, it could have set a precedent for future crypto insolvencies, allowing debtors to exclude entire regions simply due to regulatory complexity. “It would have sent the wrong message – that geography alone can determine whether investors are entitled to justice,” Ji said in a prior court submission.

Bankman-Fried’s Appeal and the Road Ahead

While the FTX estate attempts to finalize its repayment plans, the company’s founder, Sam Bankman-Fried, continues his legal fight in New York. The former CEO, who was convicted last year on multiple counts of fraud and conspiracy, is scheduled to appear for an appeal hearing this week.

Bankman-Fried maintains that both FTX and its sister trading firm, Alameda Research, were solvent at the time of their collapse in late 2022. In a document released last month, he claimed that the companies had “more than enough assets” to meet customer withdrawals, but were forced into bankruptcy by “overzealous lawyers and misleading accounting.” 

He also accused bankruptcy administrators of undervaluing FTX’s remaining assets, arguing that their sales of subsidiaries and tokens “at fire-sale prices” exaggerated the company’s financial problems.

Some of his supporters have echoed those points, suggesting that mismanagement during the bankruptcy process – rather than outright fraud – worsened the damage. Legal experts, however, continue to reject that view, citing extensive evidence that billions in customer funds were transferred to Alameda without consent. 

Prosecutors said those funds were used for risky investments, political donations, and personal expenses, all while FTX customers were misled about the safety of their deposits.

FTX filed for bankruptcy in November 2022 after the discovery of a “backdoor” channel that allowed Alameda to draw on exchange customer balances without triggering normal risk controls. The revelations caused a liquidity crisis that quickly led to one of the largest collapses in crypto history.

The FTX Recovery Trust, which now manages asset recovery and repayment, has made significant progress in liquidating holdings and recovering funds from counterparties. However, many creditors remain skeptical of the trust’s transparency and its reliance on fiat-based valuations.

For now, the trust’s decision to withdraw the restricted jurisdiction motion offers a temporary reprieve for thousands of international creditors who feared exclusion. The withdrawal notice itself included language confirming that “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 applicable rules.” In other words, the issue could reappear later if the trust deems it necessary.

Still, the timing of the reversal has been welcomed by many who have waited nearly three years for resolution. For Chinese creditors in particular, who make up the largest portion of the affected claims, the decision restores hope that they will eventually receive at least part of their lost funds.

“This feels like the first real acknowledgment that international users matter,” said one claimant who requested anonymity due to ongoing legal proceedings. “It’s not everything, but it’s something.”

As FTX continues its slow march through bankruptcy court, the global crypto community is watching closely. The outcome could shape not only how billions in lost assets are distributed but also how future cross-border crypto bankruptcies are handled. For now, creditors are taking cautious comfort in a small but meaningful victory, one that signals, at least for the moment, that fairness remains part of the process.