FTX Recovery Trust Withdraws Motion to Restrict Payouts in 49 “Restricted” Countries After Backlash

The FTX Recovery Trust (FRT), overseeing creditor repayments in the bankruptcy of FTX Trading Ltd., has officially withdrawn its motion to impose special procedures that would limit or delay distributions to creditors in 49 jurisdictions including China, Russia and Saudi Arabia, following fierce opposition. The motion, filed in July 2025, had sought to treat claims from certain “restricted foreign jurisdictions” as contested to mitigate legal risks for the estate. 

The withdrawn motion encompassed roughly $380 million in creditor claims from those regions and left open the possibility that the trust may re-file similar procedures at a later time if necessary. 

What happened & why it matters

Originally, the FRT proposed that creditors residing in the 49 jurisdictions many with crypto restrictions or weak payout infrastructure would face additional review, delayed distributions or classification as “disputed claims”. The rationale: avoid situations where paying out might violate local laws or expose the estate to legal liability. 

However, the move sparked strong backlash from international creditors and advocacy groups, particularly those in China. It was estimated that while the jurisdictions represented around 5% of the approved claims by count, they held approximately 82% of the disputed value centering the fight on Chinese-based claims.

During hearings, a U.S. Bankruptcy Court judge questioned the fairness of excluding these creditors, particularly when other recent crypto-related bankruptcy estates had paid claimants in those jurisdictions. In response to the pushback, the FRT withdrew the motion “without prejudice,” meaning it can re-file if it chooses. 

Implications for creditors and the estate

• For creditors in the restricted jurisdictions: The withdrawal is a positive step it restores hope that payouts may proceed without extra hurdles. But settlement terms and payout timing remain uncertain.
  
  

• For the FRT and bankruptcy process: The decision highlights the tension between global crypto asset claims and legal/regulatory complexity across jurisdictions. The estate must balance maximising recoveries with legal risk management.
  
  

• For other crypto bankruptcy cases: The outcome may set precedent around how “restricted jurisdiction” categories are treated in worldwide asset-distribution cases.

Key questions ahead

• Will the FRT re-file a refined version of the “restricted jurisdictions” motion, perhaps focusing on fewer countries or with clearer legal frameworks?
  
  

• How quickly will creditors in previously designated jurisdictions receive distributions now that the motion is withdrawn?
  
  

• Will other large crypto-bankruptcy estates adopt similar approaches—or steer clear to avoid creditor backlash?

FAQs

Q1: What exactly did the withdrawn motion request?
The motion asked the court to approve a process whereby claims from certain “restricted jurisdictions” would be postponed, reviewed or designated as disputed before any distribution. The goal was to ensure compliance with local laws and avoid value loss for the estate. 

Q2: Why were jurisdictions like China included on the list?
Because China and similar jurisdictions have legal restrictions on cryptocurrency-based payouts or may lack transparent distribution infrastructure. The trust argued that these complications created risk for making payments.

Q3: Does withdrawal of the motion mean all creditors will be paid at once?
Not necessarily. It removes the immediate procedural hurdle but does not guarantee payout timing, amounts, or that the estate will prioritise all regions equally. Creditors must still await the trust’s schedule and the court’s approval.

Q4: What happens to the $380 million in claims involved?
Those claims were part of the disputed-jurisdiction proposal. With the motion retracted, the claims remain valid but subject to the standard distribution plan of the FRT. The exact treatment and timing may vary.

Q5: Can the FRT submit the same type of motion again?
Yes. The motion was withdrawn “without prejudice,” meaning the FRT retains the right to file a similar or reworked motion in the future if it deems necessary. 

Q6: What should creditors in the affected jurisdictions do now?
They should monitor official updates from the FRT, ensure their claims are properly registered, keep contact information current, and consider legal counsel if they believe their claims were mis-classified or delayed unjustly.