Collapsed crypto exchange FTX has scrapped a contentious proposal that could have excluded thousands of customers from repayment, marking a crucial shift in its ongoing bankruptcy case. The plan, known as the “Restricted Jurisdiction Procedure,” was intended to block payouts to users in 49 countries where cryptocurrency activities face legal uncertainties or restrictions, including China, Russia, Ukraine, and Pakistan.
The decision to withdraw the motion follows intense backlash from creditors, particularly those in China, who make up the majority of the affected claimants. The proposal, first submitted to a U.S. bankruptcy court in July, sought judicial approval to determine whether payments could be lawfully made to users in jurisdictions with restrictive or ambiguous crypto regulations. However, critics argued that the plan was discriminatory and unsupported by legal precedent.
If approved, the measure would have excluded roughly $800 million in claims—equivalent to about 5% of FTX’s estimated $16 billion estate. Of that amount, around 82% was linked to Chinese customers alone. More than 300 Chinese claimants, represented by attorney Weiwei Ji, formally objected to the motion in a Delaware bankruptcy court, calling it both unfair and arbitrary. Facing mounting opposition, FTX formally withdrew the motion without prejudice, meaning it retains the option to reintroduce it in the future but only through a new legal process.
The withdrawal was met with relief by international customers who feared permanent exclusion from repayment plans. It also reflects growing recognition that FTX’s restructuring team must adopt a more inclusive strategy for resolving claims across countries with unclear crypto laws. Analysts say the move could improve relations between the exchange’s estate and foreign creditors as it continues efforts to compensate users affected by its 2022 collapse.
Meanwhile, the legal drama surrounding FTX’s founder, Sam Bankman-Fried, continues. Convicted last year on multiple counts of fraud and conspiracy, SBF is appealing his 25-year prison sentence in New York. He maintains that FTX was “never insolvent,” insisting that its downfall stemmed from temporary liquidity issues rather than missing funds.
In September, a 14-page document surfaced online under a social media account linked to SBF titled “FTX: Where Did the Money Go?” The post claimed that the alleged $8 billion deficit “never left the company” and accused the bankruptcy administrators of mismanagement and slow asset recovery.
FTX filed for bankruptcy in November 2022 after revelations that billions in customer deposits had been secretly transferred to its sister trading firm, Alameda Research. The scandal erased immense investor wealth and remains one of the largest financial collapses in crypto history.
