Global Creditors Force FTX to Abandon $800M Exclusion Plan

The FTX Recovery Trust has abandoned a controversial proposal that would have excluded approximately $800 million in customer claims from 49 countries, including China, Russia, and Saudi Arabia, following intense backlash from creditors. The move, announced on Nov. 3, marks a significant victory for international users who feared being denied access to their funds during the exchange's bankruptcy proceedings, according to Coinpedia. The plan, known as the "Restricted Jurisdiction Procedure," aimed to identify jurisdictions where local regulations might complicate repayments, potentially leading to the forfeiture of claims and redistribution to other creditors.

Under the original proposal, FTX would have hired local legal counsel in each of the 49 jurisdictions to assess the feasibility of compliant payouts, as TradingView reported. If compliance was deemed impossible, claims would have been designated as "restricted" after a 45-day objection period and forfeited to the trust for reallocation. The plan targeted countries with ambiguous or restrictive crypto laws, with China alone accounting for 82% of the disputed $800 million in claims, according to a Coinotag piece. Over 300 Chinese creditors, led by Weiwei Ji, a Singapore-based investor, filed objections in Delaware bankruptcy court, arguing the proposal was discriminatory and lacked legal justification, Coinotag reported.

The withdrawal of the motion, filed without prejudice, means the FTX Recovery Trust could potentially refile the request in the future, according to Coinotag breaking news. However, for now, creditors in the affected jurisdictions retain eligibility for distributions from the $16 billion estate. "This is a victory for all potentially affected creditors," Ji said in a post on X, urging claimants to remain vigilant until compensation is finalized.

The reversal has been hailed as a step toward equitable treatment in cross-border insolvencies, and has been covered widely, including by CryptoNews and another Coinotag report. "The motion's withdrawal safeguards $800 million in claims, promoting fairness in FTX's bankruptcy," said a spokesperson for the American Bankruptcy Institute. Critics, however, note that payouts remain in fiat currency, which may not fully compensate for losses incurred in volatile cryptocurrencies during the 2022 collapse.

FTX's decision comes amid broader challenges in its bankruptcy process. Founder Sam Bankman-Fried, who is serving a 25-year prison sentence, continues to contest claims that the exchange was insolvent, alleging mismanagement by bankruptcy counsel. Meanwhile, the estate faces pressure to expedite distributions, with verified claims projected to receive 118-142% recovery based on preliminary estimates.