FTX files motion to exclude its Dubai unit from bankruptcy proceedings

Bankrupt crypto exchange FTX has filed a motion in court to remove its Dubai unit from ongoing restructuring proceedings in the United States.

In a court filing on Aug. 2, FTX argued that its Dubai unit didn’t conduct any business before the bankruptcy filing; thus, the subsidy is unlikely to rehabilitate its operations. The court will start its first hearing on the issue on Aug. 23.

In the filing, the crypto exchange noted that FTX Dubai is balance sheet solvent and, 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.“

FTX Dubai is a direct, wholly-owned subsidiary of FTX’s European arm, which obtained a virtual asset service provider license from Dubai’s Virtual Assets Regulatory Authority (VARA). FTX Dubai currently holds approximately $4.5 million in several accounts, of which $4 million is restricted by VARA as security for the license.

On July 25, VARA confirmed to FTX Dubai management that such restricted cash would be released in the context of the liquidation of FTX Dubai, according to United Arab Emirates 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.”

Related: The FTX contagion: Which companies were affected by the FTX collapse?

FTX Dubai is expected to enter into an agreement with the appointed liquidator to implement basic administrative procedures, and promote the orderly and efficient administration of the liquidation.

FTX filed for bankruptcy on Nov. 11, 2022, with the exchange starting the bankruptcy proceedings for 102 associated entities worldwide.

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