Bankrupt cryptocurrency exchange FTX has reportedly been granted permission to permanently remove individual customers from all court filings, while the names of companies and institutional investors will be sealed on a “temporary basis.”
In recent times, several mainstream media outlets have pushed for access to the list of FTX customers, arguing that the press and public have a “presumptive right of access to bankruptcy filings.”
However, FTX has consistently objected to these requests, arguing that disclosing the names could put these individuals at risk, as well as potentially undermine the sale value of the crypto exchange.
According to a June 9 Reuters report, Judge John Dorsey ruled in the Delaware-based bankruptcy court, that FTX is permitted to “permanently redact” the names of individual customers from all filings, in an effort to protect their safety.
Dorsey reportedly stated that individual customers “are the most important issue in this case,” adding:
“We want to make sure that they are protected, and they don’t fall victim to any scams.”
While Dorsey acknowledged the potential risk of scams and identity theft for individuals if their names were disclosed, he doesn’t believe companies and institutional investors would face the same vulnerabilties.
Dorsey granted these entities to be removed from the list on a “temporary basis,” with FTX obliged to make a new request in 90 days to maintain the confidentiality of those names.
However, it was reiterated that while companies and institutional investors do not face the same risks as individuals, their names could still hold significant value if FTX were to sell the exchange or customer list separately.
Kevin Cofsky, a partner at investment bank Parella Weinberg, and member of the FTX restructuring team, argued in a court hearing on June 8 that releasing customer names “would be detrimental” to the restructuring efforts.
Investment banker Kevin Cofsky, FTX 2.0 advocate. pic.twitter.com/nvGU9WTM6P
— FTX 2.0 Coalition (@AFTXcreditor) June 9, 2023
Cofsky further argued that releasing the information “would impair the debtor’s ability to maximize the value that it currently possesses.”
He noted that even if the exchange wasn’t sold, if FTX were to be relaunched, creditors would have the opportunity to collect a portion of trading fees.
Meanwhile, a group of non-U.S FTX customers in December 2022 that disclosing the customers names to the general public “would cause irreparable harm, further victimizing” the customers whose assets “were misappropriated.”
However, despite the concerns of potential risks for customers, the four media firms pursuing the matter – Bloomberg, Dow Jones, The New York Times and the Financial Times – maintain the belief that it should not prevent the list from being released.
In the second joint objection filed on May 3, it was argued that such disclosure wouldn’t subject creditors to “undue risk.”