FTX’s Dubai Unit Seeks Exemption from Bankruptcy Chaos

Aug. 6, 2023
FTX’s Dubai Unit Seeks Exemption from Bankruptcy Chaos

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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Ammar Raza

Associate editor
Skilled in crafting compelling content, with a deep enthusiasm for blockchain technology. I offer precise and easily comprehensible perspectives on cryptocurrencies, decentralized finance, and the ever-evolving landscape. Count on me as a reliable resource to remain informed about the latest advancements in the world of crypto.