Back in November 2022, the FTX Exchange announced that it was unable to meet its financial obligations, which led to the start of Chapter 11 proceedings affecting 102 units worldwide.
FTX has formally requested the court to disconnect its Dubai branch FTX Dubai from the ongoing US corporate restructuring.
Furthermore, In an official submission dated August 2, FTX has put forth a strong argument. It states that its Dubai-based unit didn’t operate before bankruptcy. Consequently, it believes the branch’s chances of recovery are low. The judicial deliberation on this matter is scheduled to commence on the 23rd day of August.
Financial Standing of FTX Dubai: A Close Examination
As mentioned in the submission, the exchange highlights FTX Dubai’s solid financial state, emphasizing its healthy balance sheet. Consequently, the idea of a voluntary “liquidation procedure” in accordance with UAE law becomes the best way to distribute cash and clear debts. This happens after settling all existing obligations and selling off assets.
In addition, it’s important to mention that FTX Dubai got licensed as a virtual asset service provider by Dubai’s Virtual Assets Regulatory Authority (VARA). Also, the financial details show FTX Dubai has around $4.5 million in holdings. A significant part of this, about $4 million, is kept under VARA’s jurisdiction as security linked to the license.
VARA’s Confirmation and Legal Framework
On July 25, VARA sent a formal message to FTX Dubai’s management. The message confirmed that the previously restricted financial assets will be released as part of FTX Dubai’s liquidation process. This process adheres to the legal framework defined by the United Arab Emirates’ statutes:
Considering that the entirety of FTX Dubai’s material assets is domiciled within the territorial bounds of the United Arab Emirates and an appreciable majority of FTX Dubai’s actions antedating the initiation of the bankruptcy protocol transpired within the confines of the United Arab Emirates, the insolvent parties have arrived at the conclusion that the judicious undertaking of a timely domestic voluntary liquidation procedure, in accordance with the codified norms of the United Arab Emirates, is a course of action that harmonizes with the best interests of the distressed parties and their overall asset portfolio.”
With expectations set, FTX Dubai is poised to engage in negotiations with the designated liquidator. This is to handle basic administrative tasks, ensuring a well-organized liquidation process.
In conclusion, FTX started the formal insolvency process on November 11, 2022. This decision instigated bankruptcy proceedings across an expansive spectrum, impacting a total of 102 corporate entities interconnected with the exchange’s expansive global network.
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