Bankruptcy Court Protects FTX Customers’ Privacy
In a significant development, the bankruptcy court has granted FTX, the cryptocurrency exchange that filed for bankruptcy, the authority to withhold customer names from all bankruptcy filings. This decision comes after FTX argued that revealing customer names could expose them to scams and identity theft.
Court Grants FTX Authority to Withhold Customer Names
U.S. Bankruptcy Judge John Dorsey, presiding in Wilmington, Delaware, ruled in favor of FTX’s request to permanently redact individual customer names from bankruptcy documents. The court acknowledged the potential risks that customers could face, even if their email addresses were kept confidential.
Importance of Safeguarding Customers’ Information
Judge Dorsey emphasized the importance of safeguarding customers, stating, “The customers are our primary concern in this case. We must ensure their protection and prevent them from falling victim to any form of fraudulent activity.”
Previously, in January, Dorsey had granted FTX a three-month period to keep the names of its nine million individual customers undisclosed.
Temporary Permission for Companies and Institutional Investors
Furthermore, Judge Dorsey granted FTX temporary permission to remove the names of companies and institutional investors from its customer lists. However, the court emphasized that FTX would need to seek approval again in 90 days. While these customers may not face the same level of risk as individuals, their names could hold significant value if FTX decides to sell its crypto exchange business or customer list separately.
Mediation was Ordered to Resolve a Dispute with the Bahamian Affiliate
Additionally, Judge Dorsey addressed an ongoing dispute between FTX’s U.S. bankruptcy team and the liquidators overseeing FTX’s Bahamian affiliate, FTX Digital Markets. He ordered both parties to appoint a mediator and strive to reach a resolution, aiming to avoid conflicting judgments in the U.S. and Bahamian court proceedings.
Judge Dismisses Bahamian Liquidators’ Request
Dorsey dismissed the Bahamian liquidators’ request to initiate litigation in the Bahamas regarding assets held by the U.S. debtors. The judge firmly stated that he would not defer to the ruling of a Bahamian court regarding which FTX entity should control the assets and assume responsibility for repaying customers. Similarly, he noted that he did not expect a Bahamian court to comply with his orders.
Collaboration and Complexity of the Situation
Expressing the need for greater cooperation, Judge Dorsey admitted to grappling with the complexity of the situation, confessing, “I have spent countless nights pondering how to address this predicament.”
The Bahamian insolvency case commenced one day prior to FTX Trading and over 100 affiliates filing for bankruptcy protection in Delaware. The purpose was to address allegations of FTX misusing and losing billions of dollars worth of customers’ cryptocurrency deposits.
Background: FTX’s Bankruptcy and Fraud Charges
FTX’s founder, Sam Bankman-Fried, and several other company insiders are facing fraud charges for their involvement in the collapse of the company. Bankman-Fried is currently contesting these charges, while others have pleaded guilty and agreed to cooperate with the authorities