Bankrupt cryptocurrency exchange FTX has reportedly been given permission to permanently remove individual customers from all court filings, while the names of companies and institutional investors will be sealed “temporarily.”
Recently, several mainstream media outlets have pushed to obtain a list of FTX clients, arguing that the media and the public have a "presumptive right to a bankruptcy filing."
However, FTX has consistently opposed these requests, arguing that the disclosure of the names could put these individuals at risk and could destroy the value of the sale on the cryptocurrency exchange. Judge John Dorsey ruled in a Delaware bankruptcy court to allow FTX to "permanently redact" the names of individual clients from all filings to protect their security, Reuters reported on June 9. Dorsey reportedly said that individual clients "are the most important issue in this case," adding:
"We want to make sure they are protected and they don't fall victim to any kind of scam."
While Dorsey acknowledges the potential exposure to fraud and identity theft if an individual's name is revealed, he doesn't think corporations and institutional investors face the same vulnerabilities.
Dorsey granted these entities a “temporary” removal from the list, with FTX obligated to make new requests within 90 days to maintain the confidentiality of the names. However, it was reiterated that while corporations and institutional investors would not face the same risks as indi viduals , their names would still have significant value should FTX sell the exchange or client list separately. Kevin Cofsky, a partner at investment bank Parella Weinberg and a member of FTX's restructuring team, argued at a June 8 court hearing that making cli ents' names public " would be detrimental" to restructuring efforts. Cofsky further argued that releasing the information "would impair the debtor's ability to maximize the value it currently has."
He pointed out that even if the exchange does not sell, there is an opportunity for creditors to collect some of the transaction fees if FTX restarts.
Meanwhile, a group of non-US FTX clients whose names were disclosed to the public in December 2022 “would cause irreparable harm, further harm” to clients whose assets were “misappropriate.” However, despite concerns about the potential risk to client s, the Four media companies pursuing the matter Bloomberg, Dow Jones, The New York Times and the Financial Times still believe that the publication of the list should not be blocked.
In a second joint dissent, filed May 3, it was argued that such disclosure would not expose creditors to "undue risks".
