DOVER (AP) – The names of individual customers of collapsed cryptocurrency exchange FTX Trading can be permanently shielded from public disclosure, a Delaware bankruptcy judge ruled on Friday.
Following a two-day hearing, Judge John Dorsey rejected arguments from lawyers for several media outlets and for the United States (US) bankruptcy trustee, which serves as a government watchdog in Chapter 11 reorganisation cases, challenging FTX’s request to keep the names of customers and creditors secret.
Dorsey ruled that customer identities constitute a trade secret. He also said FTX customers need to be protected from bad actors who might target them by scouring the internet and the “dark web” for their personal information.
“It’s the customers that are the most important issue here,” he said. “I want to make sure that they are protected and they don’t fall victim to any types of scams that might be happening out there.”
Attorney for the media outlets Katie Townsend had argued that the press and the public have a “compelling and legitimate interest” in knowing the names of those affected by the stunning collapse of FTX.
“That collapse sent shock waves not just through the cryptocurrency industry, but the entire financial industry,” Townsend said. “And at this point, we don’t even know where the shock waves, both individually and institutionally, have hit the hardest, and what institutions may have the largest, or no, exposure as a result.”
But lawyers for FTX and its official committee of unsecured creditors argued that its customer list is both a valuable asset and confidential commercial information. They contend that secrecy is needed to protect FTX customers from theft and potential scams, and to ensure that potential competitors do not “poach” FTX customers. FTX believes its customer list could prove valuable as part of any sale of assets, or as part of a reorganisation.
“The debtors are in a position to realise value from these customer lists,” said FTX attorney Brian Glueckstein.
FTX entered bankruptcy in November when the global exchange ran out of money after the equivalent of a bank run. Founder Sam Bankman-Fried has pleaded not guilty to charges that he cheated investors and looted customer deposits to make lavish real estate purchases, campaign contributions to politicians, and risky trades at Alameda Research, his cryptocurrency hedge fund trading firm.
Three former FTX executives have pleaded guilty to fraud charges and are cooperating with investigators.
