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Bankrupt cryptocurrency exchange FTX has received permission to exclude individual clients from all bankruptcy lawsuits. Meanwhile, the names of companies and institutional investors will be kept secret for another 90 days.
Recently, the mainstream media has been pushing for access to FTX’s client list, arguing that the press and the public have “a purported right to access bankruptcy filings.”
However, FTX has consistently objected to these requests, arguing that revealing names could potentially undermine the cost of selling a cryptocurrency exchange if it goes public.
Individual names will now be permanently closed to the public, with companies and institutional investors temporarily removed for about three months, according to a Reuters report on June 9.
It was reported that U.S. Bankruptcy Judge John Dorsey in Wilmington, Delaware, decided to allow FTX to “permanently edit” the names of these individuals to protect their safety. He decreed:
“We want to make sure they are protected and don’t fall victim to scammers.”
However, companies and institutional investors will only be removed from the list of clients “temporarily”. It was reported that FTX would have to make a new request in 90 days to keep those names confidential.
It was explained that while companies and institutional investors do not face the same risks as individuals, their names could still have significant value if FTX sold the exchange or client list separately.
“Customers are the most important issue in this case,” Dorsey added.
Related: FTX bankruptcy judge approves sale of LedgerX
Kevin Kofsky, a partner at investment bank Parella Weinberg and a member of FTX’s restructuring team, said in court on June 8 that releasing client names would “damage” restructuring efforts.
Investment banker Kevin Cofsky, FTX 2.0 advocate. pic.twitter.com/nvGU9WTM6P
— FTX 2.0 Coalition (@AFTXcreditor) June 9, 2023
Kofsky also argued that making the information public would “limit the debtor’s ability to maximize the value it currently possesses.”
He added that even if the exchange is not sold, if FTX is restarted, lenders will have the opportunity to receive part of the trading fees.
In December 2022, a non-U.S. group of FTX clients argued that disclosing client names to the general public “would cause irreparable harm, further victimizing” clients “whose assets have been misappropriated.”
On May 4, Bloomberg, Dow Jones, The New York Times, and the Financial Times issued a second objection to sealing the identity of their clients, arguing that such disclosure would not expose lenders to “undue risk.”