By
Godfrey Benjamin
May 10th, 2024
The attorneys claimed that FTX Dubai has a solvent balance sheet.
Troubled crypto exchange FTX plans to remove its Dubai subsidiary from ongoing bankruptcy proceedings in the United States, Coindesk reported on Thursday, citing a recent court filing on August 3. When the exchange filed for bankruptcy last year, it initiated Chapter 11 cases for 102 affiliated entities around the world, including FTX Dubai, which was established in February by the company’s European arm before its unfortunate collapse in November.
Recall that the FTX unit received an operational license from Dubai’s Virtual Assets Regulatory Authority (VARA) in March, a few weeks after its launch. The grant allowed it to offer crypto services to a selected group of customers. However, the country’s financial regulator suspended the license shortly after the crash of its parent company to protect users from getting exposed.
The bankrupt company is now seeking to exclude its Dubai subsidiary from the ongoing wind-down proceedings in the US. Lawyers representing the company claimed in the filing that the Dubai unit had not conducted any business in the United Arab Emirates (UAE) before the bankruptcy filing, making it unlikely to rehabilitate its operations.
A Solvent Balance Sheet
The attorneys also said that FTX Dubai has a solvent balance sheet, suggesting that a voluntary liquidation procedure in accordance with UAE laws would allow for the timely distribution of the positive cash balance after settling all liabilities and liquidating assets.
“Additionally, FTX Dubai’s balance sheet is 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 filing reads.
While the estate argued that any court orders related to FTX Dubai when it was part of the proceedings should stand, it deems the dismissal necessary to protect the debtors and authorize payments of pre-bankruptcy wages, salaries, compensation, benefits, and expenses to Dubai employees.
A court hearing for the case is scheduled for later this month, on August 23.
FTX to Restart Crypto Exchange for International Customers
Meanwhile, before the recent court filing seeking dismissal, Coinspeaker reported that the company had unveiled its reorganization plan, classifying claimants into specific classes with plans to reboot the exchange as an offshore entity for international customers.
The plan includes 13 different classes of claims, such as FTX.com customer entitlement claims, US customer claims, and non-fungible token (NFT) customer claims. The global settlement will involve valuing claims in USD using a methodology prepared by FTX, subject to bankruptcy court approval.
The proposed plan also addresses the compensation of FTX exchange organizations for unauthorized borrowing and misappropriation of assets allegedly carried out by former CEO Sam Bankman-Fried (SBF), who is currently awaiting trial for his involvement in the collapse of the exchange and other company executives.
Intercompany claims are set to be canceled, while FTT holders may not be compensated for their token holdings. The plan includes the intent to liquidate FTX’s estates for payout distributions to customers and creditors in cash but also hints at the possibility of an offshore exchange restart, offering specific creditors the option for a share of equity, tokens, and other interests.
FTX’s bankruptcy proceedings include a lawsuit against Bankman-Fried and other implicated directors, seeking to recover over $1 billion in allegedly misappropriated funds.