Defunct crypto exchange FTX has now asked to remove its Dubai unit from the ambit of bankruptcy proceedings in the U.S. This were revealed in its court filings from today, Thursday 3 August.
It all started last year in November when FTX group’s CEO Sam Bankman-Fried resigned followed by FTX Trading, along with over 130 companies listed as affiliates, filing for Chapter 11 bankruptcy protection in the US Bankruptcy Court for the District of Delaware. Private trading company Alameda Research LLC, owned by Bankman-Fried under the FTX group umbrella, was also included in the same.
Another entity that was roped into the proceedings was FTX Dubai. However, it was set up in February 2022, owned by the company’s European arm. FTX’s filing requesting the dismissal of this unit argued that it didn’t conduct any business prior to the bankruptcy filing in the United Arab Emirates (UAE). Therefore, it “has no reasonable likelihood of rehabilitating its operations”.
The bankrupt estate further said that the request for dismissal “is necessary” to protect the debtors and authorise them to things like paying pre-bankruptcy wages and salaries, along with other compensation, benefits and expenses to Dubai employees.
The filing further stated: “Additionally, FTX Dubai is balance sheet solvent. Therefore, the Debtors believe that a solvent voluntary liquidation procedure in accordance with the laws of the United Arab Emirates would allow a timely distribution of the positive cash balance after payment of all outstanding liabilities and liquidation of all assets.”
The dramatic collapse of FTX resulted in huge losses for its customers. The lead-up to Bankman-Fried’s resignation saw multiple cash flow and liquidity problems. As a result, investors were unable to withdraw funds. There also was a $600million bailout offer from rival crypto exchange Binance Holdings Ltd. However, the same was withdrawn after 24 hours.
This severely left a deep impact on its creditors. Following the collapse, the value of Bitcoin has been on a fall too. On top of this, crypto lender BlockFi Inc., which is a substantial creditor of FTX, also filed for Chapter 11 bankruptcy, intensifying the issues further.
Therefore, liquidating FTX Dubai under UAE law is now crucial for bankrupt estate so that it can make way for the timely distribution of any outstanding liabilities. A hearing on the matter has been scheduled for 23 August.