FTX Trading Ltd., a major cryptocurrency exchange, has filed a motion to dismiss its Dubai-based subsidiary, FTX Exchange FZE, from the ongoing bankruptcy proceedings. The motion, submitted in Delaware bankruptcy court, cited the subsidiary’s lack of operations and assets as the primary reasons for seeking its exclusion.
According to the court filing, FTX Dubai never engaged in operational activities or had any customers, despite obtaining a license to operate in Dubai in July 2022. The license was suspended by Dubai regulators shortly after FTX filed for bankruptcy in November of the same year, and it expired in July 2023.
FTX argues that due to the absence of revenue-generating activities and with a positive cash balance, the Dubai subsidiary is solvent and suitable for voluntary liquidation under United Arab Emirates (UAE) law. The proposed dismissal would allow an orderly wind-down and liquidation of assets, with the remaining cash balance used for timely distribution after settling outstanding liabilities. FTX Dubai currently holds approximately $4.5 million in its bank accounts.
The company maintains that bankruptcy proceedings for the subsidiary are unnecessary and would lead to further administrative expenses. The dismissal, if approved, would permit FTX Dubai to undergo liquidation in Dubai, and creditors could pursue their claims separately in those proceedings.
In November 2022, FTX Trading and its associated companies, totaling over 100, sought Chapter 11 bankruptcy protection, attributing the move to a significant liquidity crisis caused by financial mismanagement. Following this, the founder of FTX, Sam Bankman-Fried, faced legal repercussions. In December, he was arrested and accused of defrauding investors out of billions of dollars. Despite the charges against him, Bankman-Fried has pleaded not guilty to all allegations.
The court is set to decide on the dismissal of the Dubai subsidiary in a hearing later this month. As FTX seeks to reorganize and wind down its global network of entities, the process is expected to be complex and involve multiple jurisdictions. Recently, the company and its chief restructuring officer unveiled a debtors’ reorganization strategy, proposing to relaunch FTX as an “offshore crypto exchange.”
