The bankrupt cryptocurrency exchange FTX is seeking more time in a Delaware court to respond to over 90 objections to its proposal to halt repayments to creditors in certain "foreign jurisdictions". The "Motion for Leave" would allow the FTX estate to further build its case for halting repayments to creditors in so-called restricted jurisdictions. A hearing is scheduled for Tuesday to address the original motion that triggered the legal dispute.
The FTX estate is seeking to halt repayments to 49 countries that have vague or restrictive crypto laws. The estate argues that initiating repayments to residents of said countries "may trigger fines and penalties, including personal liability for directors and officers, and/or criminal penalties up to and including imprisonment". The move affects creditors with claims totaling $470 million. Chinese residents comprise the largest group, accounting for 82% of claims in so-called restricted countries, or $380 million.
The FTX Recovery Trust stated that "Given the high volume of Objections received up until and following the Objection Deadline, the FTX Recovery Trust required additional time to draft, finalize, obtain approval of and file the Reply".
Some creditors have criticized the FTX estate's efforts to block repayments. Weiwei Ji, who says they represent hundreds of Chinese creditors in the fight, stated that they haven't taken a single break after seeing FTX's omnibus reply to their objections. Another crypto community member with the name "Mr. Purple" wrote that the process, if approved by Judge Owens, is designed to make it highly likely these claims go to $0. They added that "Selling might avoid the issue but that's not a guarantee".
According to FTX creditor Sunil Kavuri, there is $1.4 billion in FTX claims still pending some kind of resolution. The FTX estate began repaying the exchange's creditors in February, more than two years after filing for bankruptcy in November 2022.
The dispute highlights fragmented global crypto regulations, complicating cross-border asset distribution and setting a precedent for future insolvencies. Without clarity, similar delays and disputes are likely to plague future international crypto bankruptcies. The news of a delay is disheartening for the tens of thousands of creditors residing in these 49 “restricted” countries.
