Defunct cryptocurrency exchange FTX recently went bankrupt, yet it continues to prioritize the privacy of its customers. The company has successfully obtained permission to expunge individual customer names from all court filings permanently. The court has taken this extraordinary step to guard against potential scams and identity theft.

The move comes amidst increasing pressure from several mainstream media organizations advocating for access to the FTX customers list. They argue that the public holds a “presumptive right of access to bankruptcy filings”.

Privacy Over Disclosure

FTX’s firm stance on the matter has been clear and consistent. The company contends that revealing the names of their clients could not only jeopardize the individual customers but also devalue the cryptocurrency exchange in the event of a sale.

On June 9, Judge John Dorsey of the United States Bankruptcy Court for the District of Delaware supported FTX’s privacy measures. Dorsey endorsed permanently removing individual customer names from court filings, emphasizing that customers’ safety was paramount.

He said, “We want to ensure that they are protected and they don’t fall victim to any scams.”

Selective Exemption: Corporates vs Individuals

Dorsey also noted the unique vulnerabilities between individual customers and corporate entities or institutional investors. He permitted these entities’ names to be temporarily concealed, requiring FTX to reapply every 90 days to maintain confidentiality.

However, Dorsey cautioned that the names of these entities, if made public, could still command considerable value, especially if FTX decides to sell its customer list separately.

Various stakeholders have closely monitored FTX’s restructuring efforts. Kevin Cofsky, a partner at investment bank Parella Weinberg and member of the FTX restructuring team, asserted that revealing customer names could detrimentally impact these efforts.

According to Cofsky, such a move “would impair the debtor’s ability to maximize the value it currently possesses.” He further explained that even if FTX wasn’t sold, a relaunch could allow creditors to collect a portion of trading fees.

FTX: Advocacy for Client Privacy

In December 2022, a faction of non-U.S. FTX customers expressed concerns that revealing customer identities could cause “irreparable harm”, thereby further victimizing customers whose assets had been misappropriated.

FTX’s stand to protect its customers, even amidst bankruptcy, underscores the company’s commitment to privacy and security. This ruling exemplifies how privacy rights can be upheld, even in the face of potential commercial interest or public curiosity. 

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