FTX Bankruptcy Judge Dismisses Media Challenge, Says Customer Names Can Be Kept Secret

DOVER, Delaware (AP) — The names of individual customers of collapsed cryptocurrency exchange FTX Trading may be permanently protected from public disclosure, a Delaware bankruptcy judge ruled Friday.

After a two-day hearing, Judge John Dorsey dismissed arguments from lawyers for several media outlets and the U.S. bankruptcy trustee, who serves as the government’s watchdog in Chapter 11 reorganization cases, challenging FTX’s claim to keep the names of customers and creditors secret.

Dorsey ruled that the identities of the customers constituted a trade secret. He also said that FTX customers must be protected from bad actors who may target them by scouring the Internet and the “dark web” for their personal information.

“Customers are the biggest issue here,” he said. “I want to make sure that they are protected and that they are not victims of any type of scam that could happen there.”

Media lawyer Katie Townsend had argued that the press and public had a “compelling and legitimate interest” in knowing the names of those affected by FTX’s stunning collapse.

“This meltdown has sent shockwaves not only through the cryptocurrency industry, but across the financial sector as a whole,” Townsend said. “And at this point, we don’t even know where the shockwaves, both individually and institutionally, have hit the hardest, and which institutions may have the greatest exposure, if any, as a result.”

But lawyers for FTX and its official committee of unsecured creditors have argued that its client list is both a valuable asset and confidential business information. They argue that secrecy is necessary to protect FTX customers from potential theft and scams, and to ensure that potential competitors do not “poach” FTX customers. FTX believes its client list could prove valuable in any asset sale or reorganization.

“Debtors are able to realize value from these customer lists,” said FTX attorney Brian Glueckstein.

FTX went bankrupt in November when the global stock market ran out of money after the equivalent of a bank run. Founder Sam Bankman-Fried has pleaded not guilty to charges of deceiving investors and looting client deposits to make lavish real estate purchases, campaign contributions to politicians and risky trades at Alameda Research, his stock trading firm. cryptocurrency hedge funds. Three former FTX executives have pleaded guilty to fraud charges and are cooperating with investigators.

In January, Dorsey ruled that FTX could remove the names of all customers, and the addresses and email addresses of non-individual customers, from court records for 90 days. It also authorized FTX to permanently keep the addresses and email addresses of individual creditors and shareholders secret.

On Friday, the judge approved the permanent sealing of individual client names and extended secrecy regarding institutional client names for another 90 days.

Dorsey, however, refused to continue to allow FTX to protect the names of individual creditors or shareholders who are citizens of the United Kingdom or European Union countries and covered by a consumer protection program known as the General Regulations. on data protection, or GDPR. FTX has requested similar treatment for people covered by Japanese data privacy laws.

Dorsey said that in response to an objection from the U.S. administrator, FTX presented no evidence to show that these foreign individuals could be harmed or that FTX could be penalized if their names were disclosed.

Dorsey also rejected a request from lawyers for an ad hoc committee of non-US clients to keep the names of its members secret. If the committee wants to be involved in the case, then the names of its members must be disclosed, he said.

According to redacted court documents, the ad hoc committee currently has 35 members, with estimated economic interests in FTX ranging from $64,434 to $1.5 billion. Dorsey noted that some members might decide to drop out depending on her decision.

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