FTX continues to enjoy a troubled bankruptcy process. In its first bankruptcy hearing, its attorneys argued that the names and other information tied to the exchange’s creditors should be withheld for now, contrary to normal bankruptcy practices.
Judge John Dorsey of the federal Bankruptcy Court of Delaware agreed, at least for now: He ruled that the names and other personally identifiable information (PII) should remain under seal for the moment. There will be a hearing to discuss this on Dec. 16.
Late last week, a number of news organizations, including Bloomberg, Dow Jones, the New York Times and the Financial Times, filed to join the bankruptcy case in order to argue that – at the least – the names of the creditors should be released.
“Debtors claim that their ‘customer list, and related customer data, is an important and valuable asset of the Debtors and the Debtors maintain their customer list in strict confidence,’” the filing said. “They also claim that ‘Public dissemination of the Debtors’ customer list could give the Debtors’ competitors an unfair advantage to contact and poach those customers and would interfere with the Debtors’ ability to sell their assets and maximize value for their estates at the appropriate time.’”
The news organizations are not convinced by this argument, calling it vague and saying that a concern about competition does not rise to the level necessary to redact the names of a bankruptcy estate’s creditors.
The news organizations also specified that in this cas, they’re only looking for names, and not the addresses or contact information for creditors, though they added that these types of redactions should not be normalized if there isn’t a threat to the creditors.
The crypto industry is likely to argue that there is a threat, that crypto investors are targets because they hold valuable, easily transferable assets.
We saw this whole thing happen earlier this year with Celsius Network, which filed for bankruptcy protection a few months ago. Some 600,000 customer accounts were revealed, including wallet addresses, transaction histories and crypto holdings. This information could easily make someone a target for a malicious actor hoping for an easy score.
On the other hand, bankruptcies are matters of public record and the U.S. does have a system that publishes creditor names for various reasons, including having a list of people to notify. What’s more, if FTX’s creditors want to recover their funds they'll have to share their own names anyway, the news organizations pointed out.
“The Court has indicated that proofs of claim will not be submitted anonymously. If disclosure is inevitable, there is no point to keeping the names anonymous now,” the filing said.
Where things start to get kind of odd is with the U.S. Trustee’s office, which also objected to redacting the names of creditors. That entity’s filing points out that FTX doesn’t even want to file the names under seal, which is somewhat unusual.
