FTX Requests Removal of Dubai Unit From US Bankruptcy Proceedings

Troubled crypto exchange FTX files motion to dismiss its Dubai subsidiary from the US bankruptcy proceedings. FTX submitted bankruptcy forms with the US rules in November 2022, including 102 worldwide units to participate in Chapter 11 proceedings.

The August 2 court filing requests eliminating the Dubai unit from the current restructuring operations because this unit didn’t perform any business before the bankruptcy was filed. The argument says that the subsidy is unlikely to rehabilitate its procedures for this reason. The court has given August 23 as the first hearing date for this problem.

Insights Into The Matter With FTX Dubai

The court filing submitted by FTX regarding this matter states that their Dubai unit is a balance sheet solvent. “Therefore, a 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.”

What is FTX Dubai?

Dubai’s Virtual Assets Regulatory Authority (VARA) authorized FTX Dubai with a virtual asset service provider license. This FTX’s European leg is a direct and wholly-owned subsidiary, currently holding near to $4.5 million in various accounts. Of these funds, $4 million have been blocked by VARA as license security.

On July 25, VARA assured that the restricted funds would be released when FTX Dubai follows the liquidation procedure according to United Arab Emirates liquidation law.

“All of FTX Dubai’s assets are located in the United Arab Emirates, and substantially all of FTX Dubai’s prepetition activities occurred in the United Arab Emirates. The Debtors have determined that a timely local voluntary liquidation of FTX Dubai in accordance with the laws of the United Arab Emirates is in the best interests of the Debtors and their estate.”

The bankrupt estate backs its dismissal claim with the impact on debtor protection, intending to authorize them to clear debts like pre-bankruptcy wages and salaries, benefits and expenses to Dubai employees, and other compensation packages.

Based on these events, FTX Dubai can establish an agreement with an appointed liquidator to apply fundamental administrations. Further, they’ll focus on maintaining transparency, orderliness, efficiency, and effectiveness across the liquidation process in the US and Dubai.

The Layers of Legally Complex Landscape

FTX’s request for the Dubai unit’s dismissal throws shade on the highly complex legal landscape for crypto platforms working globally. Further, the inclusion of the Official Committee of Unsecured Creditors enhances the doubts and queries regarding the overall outcome and direction of the procedure.

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