FTX moves to exclude Dubai arm from bankruptcy proceedings

By: Mark Jessy

August 4, 2023 5:44 AM

In the fall of 2022, FTX filed for Chapter 11 bankruptcy protection for 102 of its subsidiaries around the world.

FTX, the bankrupt cryptocurrency exchange, has recently filed→ an appeal in court to have its Dubai unit removed from the ongoing reorganization procedures in the US.

In a court filing dated August 2, FTX contended that the subsidy is not likely to restore its operations because its Dubai company did not conduct any business prior to the bankruptcy filing. The first hearing in court about this case is scheduled to begin on August 23.

The crypto exchange stated in the filing that FTX Dubai has a positive cash balance and that a "liquidation process that complies with the regulations of the UAE would enable a timely payout of its positive cash balance following the payment of all remaining liabilities and the liquidation of all assets."

FTX Dubai is a wholly-owned subsidiary of FTX's European business that has been granted a virtual asset service provider license by Dubai's Virtual Assets Regulatory Authority (VARA). Approximately $4.5 million is held by FTX Dubai across multiple accounts; however, $4 million is subject to restrictions by VARA as safety for the license.

Related: FTX's US bankruptcy filing has been deemed invalid by the Bahamas' liquidators

On July 25th, VARA informed FTX Dubai's management that the bankruptcy of FTX Dubai would necessitate the release of such restricted monies in accordance with United Arab Emirates law.

"All of FTX Dubai's assets are situated in the United Arab Emirates and notably all of FTX Dubai's prepetition activities were conducted in the United Arab Emirates, the Debtors have concluded that an effective regional voluntary liquidation of FTX Dubai in compliance with the regulations of the UAE is most beneficial to the interests of the Debtors and their estate."

FTX Dubai will likely engage in a contract with the authorized liquidator to establish some ground rules for internal operations and facilitate the smooth running of the liquidation process.

On November 11, 2022, FTX filed for bankruptcy, initiating the bankruptcy processes for 102 affiliated corporations globally.