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The insolvency estate of the now-inoperative crypto exchange FTX has rescinded its appeal to restrict payouts to creditors in specific “prohibited foreign jurisdictions.”
On Monday, the FTX Recovery Trust submitted a notice retracting its petition to establish special procedures for regions like China, which had been identified as potentially restricted under the approved bankruptcy plan.
“If and when the FTX Recovery Trust intends to renew the request made in the Motion, the FTX Recovery Trust will submit a motion and furnish notice in compliance with the relevant regulations,” the notice indicates, mentioning that the motion has been withdrawn without prejudice.
The trust had filed the motion in early July, seeking the court’s permission to halt payouts to creditors in 49 nations including China, Saudi Arabia, Russia, and Ukraine, citing ambiguous or restrictive local cryptocurrency regulations.
Don’t rejoice prematurely, creditor cautions
The retraction marks a significant triumph for impacted FTX creditors, yet some argue that it’s premature to rejoice.
“This is a success for all potentially impacted creditors. However, until you receive what you are due, remain alert and continue to act collectively,” Weiwei Ji, a creditor known as Will on X, stated in a post on Tuesday.
The estate’s choice to withdraw the motion followed strong opposition from creditors, with at least 70 objections lodged in bankruptcy court shortly after the motion’s filing.
Amid the objections in July, Ji warned that court endorsement of the FTX estate’s motion regarding restricted nations could have established a precedent for forthcoming cryptocurrency bankruptcies.
Related: Bankman-Fried claims his greatest misstep was entrusting FTX to new CEO prior to bankruptcy
“This motion isn’t solely about FTX creditors. It creates a risky precedent that could undermine trust in the global cryptocurrency ecosystem,” he expressed at that moment.
Sunil Kavuri, a well-known FTX creditor representative, cautioned on Sunday that the value of FTX distributions may be significantly lower than anticipated by many, considering that the payouts are made in fiat rather than cryptocurrencies.
“FTX creditors are not fully compensated,” he remarked, adding that the FTX estate’s proposed 143% fiat repayment doesn’t represent losses in crypto-valued terms.
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