FTX Trading Ltd. filed a motion on Tuesday to dismiss its Dubai-based subsidiary, FTX Exchange FZE, from ongoing bankruptcy proceedings, citing the unit’s lack of operations and assets.
Dubai’s FTX Exchange Faces Voluntary Liquidation After Motion to Dismiss From Parent Company
In the motion filed in Delaware bankruptcy court, FTX stated that FTX Dubai has never engaged in operational activities or had any customers. The crypto exchange received a license to operate in Dubai in July 2022 but did not offer any services prior to FTX’s bankruptcy filing in November. Dubai regulators suspended FTX Dubai’s license shortly after the bankruptcy filing, and the license expired in July 2023.
Without having commenced any revenue-generating activities, FTX’s court filing said its Dubai subsidiary has no reasonable likelihood of rehabilitating operations. Additionally, the company stated that FTX Dubai has a positive cash balance and is solvent, making it suitable for a voluntary liquidation procedure under United Arab Emirates (UAE) law.
FTX believes dismissing the Dubai unit would allow for an orderly wind-down and liquidation of assets. The cash balance could then be used for timely distribution after paying outstanding liabilities. FTX Dubai currently holds around $4.5 million spread across bank accounts.
The motion argues that bankruptcy proceedings are not necessary for the subsidiary and would only lead to further administrative expenses. FTX stated that dismissal is in the best interest of the company and its creditors. If approved, the dismissal would allow FTX Dubai to undergo liquidation in Dubai. Creditors could still pursue claims directly against the subsidiary in those separate proceedings.
FTX Trading and over 100 affiliated companies filed for Chapter 11 bankruptcy protection in November 2022. The company cited a severe liquidity crisis following revelations of financial mismanagement. FTX founder Sam Bankman-Fried was arrested in December and charged with defrauding investors out of billions of dollars. He has pleaded not guilty to all charges against him.
Tuesday’s motion indicates winding down FTX’s global network of entities will be a complex process spread across jurisdictions. The court will decide whether to grant dismissal of the Dubai subsidiary in a hearing later this month. Just recently, FTX and the firm’s CEO and chief restructuring officer, John J. Ray III, unveiled the debtors’ reorganization strategy which included a proposal of rebooting FTX as an “offshore crypto exchange.”
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