Bankrupt cryptocurrency exchange FTX has reportedly been given permission to permanently remove individual clients from all court filings, while the names of companies and institutional investors will be "temporarily" sealed.
In recent times, several major media outlets have lobbied for access to FTX's client list, arguing than the press and the public has a "presumptive right of access to bankruptcy filings."
However, FTX has consistently opposed these requests, arguing that revealing the names could put these individuals at risk, as well as potentially undermine the sale value of the cryptocurrency exchange.
According According to a Reuters report on June 9, Judge John Dorsey ruled in the Delaware-based bankruptcy court that FTX can "permanently remove" the names of individual clients from all filings, in an effort to protect their security.
Dorsey reportedly stated that individual clients "are the most important issue in this case," adding:
โWe want to make sure they are protected and that they don't fall victim to any scams.โ
While Dorsey acknowledged the potential risk of scams and identity theft to individuals if their names are released, he doesn't believe businesses and institutional investors face the same vulnerabilities.
Dorsey granted the delisting of these entities on a "temporary" basis, and FTX was forced to make a new request in 90 days to keep those names confidential.
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 client list separately.
Related: FTX bankruptcy judge approves sale of LedgerX
Kevin Cofsky, partner at investment bank Parella Weinberg and member of the FTX restructuring team, argued in a court hearing on June 8 that revealing client names "would be detrimental" to restructuring efforts.
Investment banker Kevin Cofsky, proponent of FTX 2.0. pic.twitter.com/nvGU9WTM6P
โ FTX 2.0 Coalition (@AFTXcreditor) June 9, 2023
Cofsky further argued that disclosing the information "would impair the debtor's ability to maximize the value it currently owns."
He noted that even if the exchange was not sold, if FTX were to relaunch, creditors would have the opportunity to collect a portion of the trading fees.
Meanwhile, a group of non-US FTX clients in December 2022 that the clients disclosed names for the general public "would cause irreparable damage, further victimizing" customers whose assets "were misappropriated."
However, despite concerns about potential risks to customers, the four media companies investigating the matter (Bloomberg, Dow Jones, The New York Times and the Financial Times) maintain the belief that it should not prevent it from being published. the list.
In a second joint objection filed on May 3, it was argued that such disclosure would not expose creditors to "undue risk."
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