According to reports, bankrupt cryptocurrency exchange FTX has been given permission to completely obliterate all client names from court documents, while sealing company and institutional investor names on a “temporary basis.”The list of FTX clients has recently come under pressure from numerous major media organizations, who claim that the public and press have a “presumptive right of access to bankruptcy filings.”However, FTX has continually rejected these demands, claiming that publishing the names might put these people in danger and perhaps reduce the cryptocurrency exchange’s market value.
Judge John Dorsey of the United States Bankruptcy Court for the District of Delaware authorized FTX to “permanently redact” the identities of specific customers from all filings for their security, according to a June 9 Reuters story.Individual customers “are the most important issue in this case,” according to Dorsey, who also said, “We want to make sure they are safe and aren’t taken advantage of by any scams.”While acknowledging the possibility of frauds and identity theft for specific people if their names were made public, Dorsey doesn’t think businesses and institutional investors would be at the same danger.
Dorsey agreed to allow the removal of these organizations from the list on a “temporary basis,” with FTX being required to submit a fresh request in 90 days to protect the privacy of those persons.Even if businesses and institutional investors do not face the same dangers as private investors, it was emphasized that if FTX were to sell the exchange or client list independently, the identities of these groups might still be quite valuable. A member of the FTX restructuring team and partner at Parella Weinberg, Kevin Cofsky argued in court on June 8 that disclosing customer identities “would be detrimental” to the restructuring operations.
In addition, Cofsky claimed that disclosing the information “would impair the debtor’s ability to maximize the value that it currently possesses.” He said that creditors would be able to get a cut of trading fees even if the exchange wasn’t sold and FTX were to be restarted. A group of non-American FTX clients asserted in December 2022 that revealing the clients’ names to the public “would cause irreparable harm, further victimizing” the clients whose assets “were misappropriated.”The four media companies involved in the case—Bloomberg, Dow Jones, The New York Times, and the Financial Times—remain certain that the list should be made public notwithstanding any potential hazards to customers. It was stated in the second joint objection, which was submitted on May 3, that such disclosure wouldn’t put creditors at “undue risk.”