- Cryptocurrency exchange FTX has filed a motion to remove its Dubai unit from US restructuring proceedings
- The FTX Dubai unit seeks voluntary liquidation in the UAE, holding $4.5 million in assets
- The cryptocurrency exchange and associated entities filed for bankruptcy in November 2022
FTX, a cryptocurrency exchange that declared Bankruptcy, has submitted a motion in court seeking to exclude its Dubai unit from the ongoing court proceedings in the United States. The motion, filed on August 2, argues that the Dubai subsidiary had not conducted any business before the bankruptcy filing. As such, its inclusion in the restructuring court proceedings would not contribute to rehabilitating its operations. The court is scheduled to hold the first hearing on this matter on August 23.
FTX’s court filing emphasizes that FTX Dubai maintains a balance sheet solvency. This makes it eligible for a voluntary liquidation procedure under the laws of the United Arab Emirates (UAE). This voluntary liquidation would enable a timely distribution of the positive cash balance. This will be after settling all outstanding liabilities and liquidating all assets.
FTX Dubai operates as a direct, fully-owned subsidiary of FTX’s European arm. It had obtained a virtual asset service provider license from Dubai’s Virtual Assets Regulatory Authority (VARA). Presently, FTX Dubai holds around $4.5 million across multiple accounts. However, $4 million is restricted by VARA as security for the aforementioned license.
The restricted cash would be released as part of the liquidation process of FTX Dubai. This is according to information conveyed to FTX Dubai management by VARA on July 25. Furthermore, in accordance with UAE law. Given that all of FTX Dubai’s assets are situated in the UAE and most of its prepetition activities occurred there, the decision to undergo a local voluntary liquidation in compliance with UAE laws is deemed to be in the best interests of FTX and its estate.
FTX Dubai is anticipated to enter into an agreement with the appointed liquidator to implement basic administrative procedures. This is to ensure an orderly and efficient administration of the liquidation.
FTX, along with its 102 associated entities worldwide, filed for bankruptcy on November 11, 2022. The exchange initiated bankruptcy proceedings for these entities to address their financial challenges and explore restructuring options.
The move to exclude FTX Dubai from the US restructuring proceedings reflects the company’s belief that the subsidiary’s circumstances warrant a separate liquidation procedure in the UAE. By pursuing a voluntary liquidation, FTX Dubai aims to efficiently resolve its affairs. Furthermore, it aims to distribute its positive cash balance to creditors and stakeholders while complying with local regulations.
As the court hearing approaches, FTX and its stakeholders await a decision on the motion. The outcome will determine whether FTX Dubai proceeds with its local voluntary liquidation or remains part of the broader restructuring process in the United States.
The cryptocurrency market has been highly volatile, and some exchanges have faced financial challenges. This is due to various factors such as regulatory changes, cyber-attacks, and market fluctuations. FTX’s bankruptcy filing reflects the complex and dynamic nature of the crypto industry, where entities must navigate evolving regulatory landscapes and manage risks associated with digital assets.
As FTX continues to navigate the bankruptcy proceedings and explore options for its associated entities, the cryptocurrency market as a whole remains under scrutiny from regulators and investors. Market participants and stakeholders are closely monitoring developments to understand how these events might impact the broader crypto landscape and the industry’s overall stability and growth.
For FTX and other crypto exchanges, compliance with regulatory requirements, risk management practices, and financial prudence will continue to be essential elements. This is in order to maintain stability and resilience amidst a rapidly evolving market. As the industry matures, exchanges and other crypto-related businesses will likely face increasing scrutiny and must proactively adapt to regulatory and market changes to ensure long-term sustainability and success.