U-Turn By FTX: Withdraws Proposal Potentially Impacting Customer Claims Worldwide

The bankruptcy estate of the now-defunct cryptocurrency exchange FTX has decided to withdraw its motion aimed at limiting creditor distributions to certain “potentially restricted foreign jurisdictions.” This decision follows substantial pushback from creditors and a wave of objections filed in bankruptcy court. 

FTX Trust Abandons Controversial Plan

The FTX Recovery Trust, which filed a notice on Monday, had previously sought court approval to freeze payouts to creditors in 49 countries, including China, Saudi Arabia, Russia, and Ukraine, citing ambiguous or restrictive local regulations surrounding cryptocurrency.

The trust’s motion, filed in early July, aimed to implement procedures that could have significantly affected the rights of creditors in these regions. However, numerous objections—over 70—were submitted shortly after the motion was made public, prompting the estate to reconsider its approach. 

Weiwei Ji, a creditor, emphasized that while the withdrawal represents a victory for affected creditors, it is crucial to remain vigilant until compensation is fully received. He warned that the implications of the motion extended beyond FTX creditors and could potentially undermine trust in the global cryptocurrency ecosystem.

In related developments, the FTX estate’s planned repayment strategy has raised concerns about the actual value of distributions. Creditor representative Sunil Kavuri cautioned that creditors might receive far less than anticipated, particularly since repayments are being issued in fiat currency rather than cryptocurrencies. 

He pointed out that while the estate has outlined a 143% repayment plan in fiat terms, this does not adequately reflect the losses incurred when measured in cryptocurrencies.

Meanwhile, amidst the backdrop of FTX’s legal struggles, co-founder Sam Bankman-Fried is seeking to overturn his fraud conviction and 25-year prison sentence. 

Sam Bankman-Fried Seeks To Overturn Conviction

Bankman-Fried’s legal team argues that he was wrongfully convicted due to a rush to judgment influenced by the media, prosecutors, and notably, US District Judge Lewis Kaplan. In a brief submitted to the 2nd US Circuit Court of Appeals, Bankman-Fried’s lawyers contended that he was presumed guilty even before formal charges were filed.

The appeal is being presented by Alexandra Shapiro, a criminal appeals lawyer known for her successes in similar cases. She is set to argue against the conduct of Judge Kaplan, who has been accused of bias against Bankman-Fried throughout the trial. 

The defense claims that Kaplan pressured jurors for a swift verdict by offering amenities and suggesting they could extend their deliberation hours. Moreover, they assert that the judge “ridiculed” Bankman-Fried’s testimony and undermined his defense.

Bankman-Fried’s legal team is also challenging Kaplan’s decision to prevent him from informing the jury that FTX had sufficient assets to repay its customers, while the prosecution was allowed to assert that he had stolen billions, leading to the company’s downfall. 

Amidst these legal battles, there are reports that Bankman-Fried’s parents are exploring options for securing a presidential pardon, potentially from former President Donald Trump. Bankman-Fried’s team maintains that he did not intend to defraud customers, believing they would ultimately be repaid. 

Featured image from DALL-E, chart from TradingView.com