TLDR
- Backpack originally announced the purchase of FTX EU for $32.7 million
- FTX quickly clarified that no binding agreement was in place
- Backpack admitted the deal was not complete but denied misrepresentation
- The $32.7 million deal requires approval from creditors and authorities
- FTX EU holds a valuable MiFID II license from the regulatory authorities of Cyprus
A premature announcement about acquisition of FTX’s European division has prompted a public clarification from both parties, revealing that the widely reported $32.7 million deal remains incomplete. The incident began when crypto wallet provider Backpack announced its purchase of FTX EU, only for FTX to quickly dispute the claim.
On Tuesday, Backpack made headlines by announcing that it had acquired FTX EU for $32.7 million. The company presented the deal as a springboard for its expansion into European markets, highlighting the value of FTX’s EU regulatory licenses.
FTX responded within hours and issued a statement that no binding agreement has been reached. The bankrupt cryptocurrency exchange stressed that any potential sale would require approval from creditors and regulators before moving forward.
In response to FTX’s correction, Backpack released its own statement on Wednesday, acknowledging that while the purchase was not complete, the company had begun negotiations in good faith. Backpack claimed it had not misrepresented the situation and described the announcement as a reflection of ongoing discussions.
The contested announcement highlighted the complex nature of bankruptcy-related acquisitions. FTX, which is currently navigating bankruptcy proceedings, must follow strict protocols for asset sales, including obtaining court approval and ensuring that creditors’ interests are protected.
FTX EU has particular appeal due to its MiFID II license from the Cyprus Securities and Exchange Commission. This license allows regulated trading of cryptocurrencies within the EU, making it a valuable asset for companies looking to establish themselves in European markets.
The clarification from FTX emphasized the need for transparency in the sales process. The company stated that any transaction involving FTX EU must comply with applicable laws and prioritize the interests of creditors, indicating that several steps remain before any deal can be completed.
Backpack’s statement defended its position, saying the announcement reflected genuine progress in negotiations. However, the company did not address specific concerns about regulatory approvals or the timeline for meeting the necessary requirements.
The proposed price tag of $32.7 million represents just a fraction of FTX’s previous valuation, reflecting the dramatic decline in the company’s fortunes since its collapse in late 2022. The sale of FTX EU would mark another step in the unwinding of FTX: s global assets.
Financial experts familiar with bankruptcy proceedings note that such deals typically require extensive documentation, regulatory approval and court approval. These requirements can extend the timeline for completing transactions, even when the parties have reached preliminary agreements.
The involvement of the Cyprus Securities and Exchange Commission adds another layer of complexity to the potential deal. Any change in ownership of a licensed entity requires regulatory review and approval, a process that can take several months.
FTX’s creditors maintain a strong interest in maximizing recovery from asset sales. The company’s bankruptcy trustee must demonstrate that any sale price represents fair market value and serves the best interests of creditors.
Backpack’s interest in acquiring FTX EU is in line with broader industry trends for companies looking to expand through the acquisition of regulated entities. Obtaining licenses through acquisition can often prove faster than applying for new ones.
Both companies are continuing discussions, but neither has given a timeline for reaching a binding agreement. The incident serves as a reminder of the structured processes required in bankruptcy sales.
The latest development saw Backpack maintain its commitment to complete the acquisition while acknowledging the preliminary nature of the current deal.
