On November 3, 2025, the FTX Recovery Trust withdrew its previously submitted motion to the U.S. Bankruptcy Court in Delaware regarding the implementation of restricted procedures in potential restricted jurisdictions.
Since FTX's collapse at the end of 2022, global creditors have been waiting for compensation for nearly three years. After a lengthy and complex liquidation process, creditors are also set to receive a third round of payments totaling approximately $1.6 billion soon.
However, on July 2, 2025, the FTX Recovery Trust submitted a motion to the U.S. Bankruptcy Court in Delaware for the implementation of restricted procedures in potential restricted jurisdictions.
The motion cited "local laws prohibiting cryptocurrency" as the reason and identified 49 "potentially restricted foreign jurisdictions," including mainland China and Macau, intending to systematically deprive users from specific countries or regions of their right to claim compensation. According to data disclosed by FTX in the July motion, Chinese creditors accounted for 83.8% of the $400-500 million in assets in the "potentially restricted jurisdictions."
This controversial motion faced strong opposition from creditors in the restricted regions as soon as it was proposed, and the presiding judge of the bankruptcy court also expressed clear objections to the motion during a hearing on October 23, 2025. On November 3, the FTX Recovery Trust announced the unconditional withdrawal of the motion. Why was the motion withdrawn? What does this withdrawal mean for Chinese creditors? The Sa Jie team will provide answers.
In November 2022, the world's third-largest cryptocurrency exchange, FTX, collapsed, resulting in over $8 billion in customer fund losses and subsequently declared bankruptcy. Founder Sam Bankman-Fried (SBF) and core senior members were accused of several major financial crimes, including wire fraud, securities and commodities fraud, money laundering, and violations of campaign finance laws.
On February 18, 2025, FTX officially began the process of compensating user assets. On July 2, 2025, the FTX Recovery Trust submitted a motion to the U.S. Bankruptcy Court in Delaware for the implementation of restricted procedures in potential restricted jurisdictions.
"Restricted jurisdictions" refer to countries and regions where the FTX Recovery Trust has not confirmed whether it can legally pay creditors in those areas after investigating applicable laws and regulations globally.
According to the motion, FTX would handle these claims in two steps: first, the liquidator would hire lawyers to assess whether assets could be distributed to these jurisdictions; if the legal opinion deems payment impossible, the relevant funds would be transferred to the liquidation trust account for "legal confiscation"—meaning that Chinese users might not only receive nothing but their assets could even become "confiscated funds" of the trust. This is extremely unfavorable for Chinese creditors.
The compliance rationale for the restricted procedure motion is difficult to reconcile, essentially serving as a means to evade debt compensation responsibilities under the guise of compliance. The Sa Jie team analyzes that the FTX Recovery Trust's decision to withdraw the aforementioned motion after four months was primarily based on three reasons.
- The motion violates the principles of U.S. bankruptcy law.
The FTX motion targeted creditors from 49 jurisdictions (such as China, Russia, Nigeria), which contradicts the principle of the U.S. Bankruptcy Code that requires "equal treatment of creditors in similar situations."
FTX attempted to leverage geographic factors by labeling these regions as "unfriendly to cryptocurrency" and "high risk," intending to override contractual obligations and evade debt, revealing its ulterior motives, which are unlikely to receive court support.
- Clear opposition from the bankruptcy court.
The withdrawal of the motion was explicitly recorded, stating that it was "based on the reasons set forth by the Court on the record at the hearing on October 23, 2025." This strongly suggests that the withdrawal was compelled by the court's negative inclination expressed during the hearing.
Based on PANews' interview with Will, a representative of Chinese creditors, the judge overseeing the FTX bankruptcy case was replaced by Judge Owens. During the October hearing, Judge Owens ultimately requested the FTX Trust to withdraw this motion.
His exact words were, "There is no formal rejection in writing, but I hope you will go back and think deeply," and he specifically mentioned rethinking the "list of potentially restricted countries," likely hinting that FTX needed to reassess whether China should still be included on that list. Therefore, the FTX bankruptcy administrators anticipated that the motion was likely to be denied, leading to its withdrawal.
- Efforts from creditors in restricted regions.
Once the motion was submitted, it triggered strong opposition from over 300 Chinese creditors, who formally filed objections with the court. Chinese creditors, represented by Will, actively responded in a Telegram group, rushing to submit opposing materials in an effort to do so before the motion took effect. The effective withdrawal also demonstrated that the unity of Chinese creditors and their active pursuit of legal procedures to protect their rights was effective.
Legally speaking, the so-called "prudent" approach in the FTX motion essentially uses the complex policy environment surrounding cryptocurrency between countries as a shield to evade debt to the Chinese region, increasing the compensation ratio for other regions or even profiting from it. Therefore, in the FTX case, Chinese creditors have reason to remain cautiously optimistic. Specifically:
First, there are successful precedents for compensation in similar cases. Other cryptocurrency platforms like Celsius, also under U.S. bankruptcy proceedings, successfully compensated users, including those in China, via bank wire transfers, without refusing payment due to so-called "regulatory restrictions."
Second, China does not deny the property attributes of virtual currencies. While mainland China prohibits cryptocurrency trading activities and financial institutions from providing related services, multiple rulings have indicated that the legal ownership of virtual currencies and their derived claims by Chinese residents has never been denied by law. Hong Kong has established a compliant cryptocurrency regulatory system that can serve as a payment channel, and Macau has not prohibited individuals from holding cryptocurrencies.
Finally, there is a realistic possibility for Chinese creditors to receive compensation. Chinese law does not prohibit individuals from receiving dollar remittances, and FTX's compensation plan for users is essentially denominated and settled in dollars, meaning users should receive dollar compensation, which does not directly conflict with engaging in cryptocurrency trading. Chinese users can receive wire transfers through Hong Kong accounts.
The withdrawal of this motion is a significant positive development, meaning that Chinese creditors have regained equal status in legal proceedings. In this round of compensation, Chinese creditors are expected to receive payments according to the same processes and timelines as other creditors, without undergoing additional review procedures that could lead to significant delays.
The withdrawal of this motion represents a stage victory for Chinese creditors. However, whether they can ultimately receive compensation smoothly still depends on the final approval of the U.S. Bankruptcy Court and subsequent practical operations.
The administrators' withdrawal of the motion does not rule out the possibility of resubmitting the same or a similar motion in the future if conditions change or if they are better prepared. Ordinary creditors' self-help under a vast and complex judicial system remains challenging.
Related: Newly established cryptocurrency organization aims to set unified standards for blockchain transactions
Original article: “New Developments in the FTX Bankruptcy Case: Chinese Creditors Achieve Interim Victory…”
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