FTX Requests More Time Amid $470M Freeze Dispute

Key Takeaways

• FTX estate seeks court extension to respond to over 90 creditor objections regarding proposed payment freeze
• 49 countries designated as “restricted foreign jurisdictions” affecting $470M in claims
• Chinese residents represent 82% of restricted claims worth $380 million
• Creditors criticize the estate’s attempt to halt payments citing legal complications
• $1.4 billion in FTX claims remain unresolved according to creditor representatives

The bankruptcy estate of the defunct cryptocurrency exchange FTX is seeking a court-approved extension in Delaware to respond to more than 90 formal objections to its plan to suspend payments in designated “foreign jurisdictions,” according to court documents.

Filed on Sunday, the estate’s “motion for leave” aims to secure additional time to address the wave of creditor opposition. A court hearing is scheduled for Tuesday to discuss the original proposal, which triggered the legal standoff.

“Due to the large number of objections received by and after the Objection Deadline, the FTX Recovery Fund requires additional time to draft, finalize, seek approval, and file the Reply,” the estate wrote.

Proposed Payment Restrictions

The estate’s proposal seeks to bar repayments to creditors in jurisdictions with unclear or restrictive crypto regulations. It argues that issuing payments in these regions may expose the estate’s officers and directors to fines, personal liability, or even criminal prosecution.

This move affects creditors in 49 countries, with total compensation claims reaching $470 million. Chinese residents constitute the largest group, accounting for 82% of claims in restricted countries, equivalent to $380 million.

Creditor Pushback

The FTX estate has faced criticism from several creditors over efforts to prevent debt payments. Among them is Weiwei Ji, who claims to represent hundreds of Chinese creditors in this battle.

“Since this morning, I haven’t rested once after seeing FTX’s general response to our objections,” Ji stated on social media platform X Monday.

A cryptocurrency community member identifying as “Mr. Purple” wrote on X that the situation is actually “worse than they think,” adding: “If approved by Judge Owens, this process is designed to ensure a high probability that these compensations will amount to $0. A sale might avoid this issue, but that’s not guaranteed.”

According to FTX creditor Sunil Kavuri, $1.4 billion in FTX compensation claims remain pending resolution.

Background

FTX began making repayments to creditors in February—more than two years after filing for bankruptcy in November 2022. However, payments to creditors in 49 “restricted foreign jurisdictions,” including China, have been withheld due to regulatory concerns.

The legal battle underscores the ongoing complexity of the FTX bankruptcy, as the estate tries to reconcile conflicting international regulations with pressure to repay affected users. The outcome of Tuesday’s hearing may set a critical precedent for how foreign claims are treated going forward.