Crypto exchange FTX, mired in bankruptcy turmoil, FTX has submitted a motion to the court seeking the exclusion of its Dubai subsidiary from the ongoing bankruptcy proceedings in the United States. The motion, filed on August 2, has sparked a contentious legal battle that could potentially reshape the trajectory of FTX’s restructuring efforts.
The exchange’s argument hinges on the assertion that its Dubai unit had not conducted any operational activities before the bankruptcy. Therefore, the company contends that rehabilitating its operations through bankruptcy proceedings would be both unnecessary and impractical. The court is scheduled to commence deliberations on this matter on August 23.
The court filing further emphasizes the financial stability of FTX Dubai, highlighting its balance sheet solvency. The company suggests a voluntary liquidation procedure under UAE laws. Additionally, experts believe this will accelerate cash asset distribution after settling debts and liquidating assets.
FTX Dubai, a direct subsidiary of FTX’s European arm, holds a virtual asset service provider license granted by Dubai’s Virtual Assets Regulatory Authority (VARA). The subsidiary currently possesses around $4.5 million, with $4 million held in restricted accounts as security for its license.
VARA recently confirmed that the restricted funds would be released in alignment with the liquidation process per UAE legal provisions. The exchange’s decision to pursue liquidation within the UAE stems from the geographical concentration of FTX Dubai’s assets and activities within the Emirates.
Lack of Communication on FTX Bankruptcy Plan
However, the exchange’s bankruptcy saga is far from one-sided. The Official Committee of Unsecured Creditors (UCC), representing FTX customers, expressed deep disappointment. The exchange’s proposed Chapter 11 exit plan made them unhappy.
The UCC revealed that despite promises and appeals for communication, it had not engaged in any substantive discussions with FTX’s restructuring team regarding the draft plan.
The plan’s unilateral nature and perceived lack of responsiveness to customer input were criticized by the UCC. An area of concern lies in the absence of an individual with significant cryptocurrency expertise. This absence raises questions about designating someone to oversee a potential revival of the exchange.
According to the UCC, it is crucial to establish a regulatory-compliant recovery token that prioritizes customers who have been most impacted by the collapse of the exchange.
Amidst the clash of perspectives, there appears a glimmer of hope for finding a resolution. The UCC has acknowledged FTX’s restructuring team’s willingness to modify the plan incorporating the recommendations proposed by the committee.
It is essential to note that successful negotiations can play a pivotal role in determining the final course of action. However, the UCC advises against disregarding insights from experts familiar with the intricate dynamics of cryptocurrency markets.
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