FTX Seeks to Dismiss Turkish Entities From Bankruptcy Case

By Andrew Asmakov

The imploded cryptocurrency exchange FTX wants the Delaware bankruptcy court to expel its Turkish units from the bankruptcy case, arguing that U.S. court orders “do not have legal or practical effect” in Turkey.

In a filing put forward Friday, FTX also said there’s “no reason to believe that the Turkish government will comply with this Court’s orders,” meaning the exchange will not be able “to exercise sufficient control” over the affairs of the Turkish units to comply with its duties under the Bankruptcy Code.

Soon after FTX filed for Chapter 11 bankruptcy in November, the Turkish Treasury and Finance Ministry launched a probe into the collapse of the exchange, which ran a local subsidiary called FTX Turkey, before seizing its assets later that month.

FTX says Turkish units 'not strategic'

As detailed in the filing, the local exchange is 80% owned by FTX Trading Ltd, with the remaining 20% of the equity owned by SNG Investments, an indirect wholly-owned subsidiary of Alameda Research LLC, which operated as a market-maker.

The filing refers to both FTX Turkey and SNG Investments as “not strategic” to FTX’s global operations.

Additionally, citizens have begun filing private claims and initiating execution proceedings against FTX Turkey Turkish Debtors, according to the filing.

FTX argues that this also means that any assets of FTX Turkey located in the country may be subject to those private claims and proceedings, adding that local authorities may use them to satisfy any judgments by Turkish courts.

Given all the reasons, FTX believes that the dismissal of Turkish entities is in the best interests of both creditors and debtors’ estates, and continuing the proceedings “will result in a waste of scarce resources and the unnecessary accumulation of fees.”

Friday also saw federal prosecutors ask U.S. District Judge Lewis Kaplan to ban FTX’s founder Sam Bankman-Fried from using encrypted communications channels such as Signal.

The prosecutors alleged that by using messaging applications, he may have tried to influence the testimony of potential witnesses in the bankruptcy proceedings.

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