Bankrupt FTX Seeks to Exclude Dubai Unit from U.S. Wind-down Proceedings

Liquidating FTX Dubai under UAE law for timely distribution of liabilities

Bankrupt crypto exchange FTX is seeking to exclude its Dubai unit from the wind-down proceedings in the U.S. FTX Dubai, which was established in February 2022 and owned by the company’s European arm, did not conduct any business prior to the bankruptcy filing in the UAE. The bankrupt estate argues that liquidating FTX Dubai under UAE law would allow for the prompt distribution of any outstanding liabilities and the positive cash balance. The estate maintains that any court orders involving FTX Dubai should remain in effect, but the dismissal of the unit is necessary to protect the debtors and facilitate the payment of wages, salaries, and other compensation to Dubai employees. A hearing on the matter is scheduled for Aug. 23.

Key Points:

FTX wants to exclude its Dubai unit from the wind-down proceedings in the U.S.
FTX Dubai did not conduct any business prior to the bankruptcy filing in the UAE.
Liquidating FTX Dubai under UAE law would allow for timely distribution of liabilities.
FTX Dubai is balance sheet solvent and a voluntary liquidation procedure is proposed.
The dismissal of FTX Dubai is necessary to protect the debtors and facilitate payments to employees.

Hot Take:

FTX’s move to exclude its Dubai unit from the bankruptcy proceedings in the U.S. reflects the company’s belief that liquidating the unit under UAE law would be more advantageous for the distribution of liabilities. This highlights the complexities and considerations involved in cross-border bankruptcies within the crypto industry. The outcome of the hearing on Aug. 23 will shed further light on how the court will navigate these issues.