Bankrupt cryptocurrency exchange FTX has obtained permission to remove individual clients from all court records in their bankruptcy case. However, the names of companies and institutional investors will remain sealed for another 90 days.
In the last times, several media outlets have lobbied for access to FTX’s client listarguing that the press and the public have a “presumed right of access to bankruptcy files.”
However, FTX has consistently opposed these requestsarguing that revealing the names could endanger these individuals, as well as potentially undermine the sale value of the cryptocurrency exchange.
According to a Reuters report on June 9, Judge John Dorsey ruled in the Delaware-based bankruptcy court on June 9 that FTX may “permanently remove” individual customer names from all files in an effort to protect your security..
Dorsey stated that individual customers “are the most important issue in this case”and added:
“We want to make sure they are protected and that they don’t fall victim to any scams.”
Although Dorsey acknowledged the potential risk of scams and identity theft for individuals if their names were revealed, does not believe that companies and institutional investors will face the same vulnerabilities.
Dorsey granted these entities “temporary” delisting.with the obligation of FTX to make a new request in 90 days to maintain the confidentiality of those names.
However, it was reiterated that although companies and institutional investors do not face the same risks as individuals, their names could continue to have significant value if FTX were to sell the exchange or client list separately.
Kevin Cofsky, partner at investment bank Parella Weinberg and member of the FTX restructuring team, argued in a June 8 court hearing that divulging client names “would be detrimental” to restructuring efforts.
Investment banker Kevin Cofsky, FTX 2.0 advocate. pic.twitter.com/nvGU9WTM6P
— FTX 2.0 Coalition (@AFTXcreditor) June 9, 2023
Investment banker Kevin Cofsky, proponent of FTX 2.0.
Cofsky further argued that releasing the information “would impair the debtor’s ability to maximize the value it currently holds”.
He added that even if the exchange was not sold, if FTX were to relaunch, creditors would have an opportunity to collect a share of trading fees.
A group of FTX’s non-US clients argued in December 2022 that revealing client names to the general public “would cause irreparable damage, further victimizing” clients whose assets “were misappropriated”.
However, in the second joint objection filed by Bloomberg, Dow Jones, The New York Times and the Financial Times on May 3, it was argued that such disclosure would not subject creditors to “undue risk”.
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