Judge Allows FTX To Redact Customer Names

U.S. Bankruptcy Judge John Dorsey in Wilmington, Delaware, has ruled in favor of cryptocurrency exchange FTX, allowing the permanent redaction of individual customer names from its bankruptcy filings. The decision comes after concerns were raised that publishing customer names could expose them to risks, even if other identifying information was kept confidential.

Customer Protection in FTX Case

Judge Dorsey emphasized the importance of protecting customers and ensuring their safety from potential scams. Recognizing the significance of the matter, he stated, “It is the customers who are the most important issue in this case.”

Previously, in January, Judge Dorsey had granted FTX a temporary three-month period to keep the names of 9 million individual customers confidential. Now, he has authorized the removal of company and institutional investor names from FTX’s customer lists on a temporary basis, with FTX required to submit a new request after 90 days. Judge Dorsey acknowledged that while individuals face risks, companies and institutional investors do not encounter the same level of vulnerability. However, their names could hold value if FTX decides to sell its crypto exchange business or customer list in the future.

In addition, Judge Dorsey addressed a longstanding dispute between FTX’s U.S. bankruptcy team and liquidators responsible for winding down FTX’s Bahamian affiliate, FTX Digital Markets. He instructed both parties to seek a mediator and strive for consistency in rulings across the separate court proceedings in the United States and the Bahamas.


Bahamian Liquidators’ Request

Judge Dorsey declined the Bahamian liquidators’ request to initiate litigation in Bahamian courts regarding assets held by the U.S. debtors. He asserted that he would not defer to a Bahamian court’s decision on which FTX entity should control assets and assume responsibility for repaying customers. Furthermore, he noted that he would not expect a Bahamian court to comply with his orders.

Expressing the need for greater cooperation, Judge Dorsey described grappling with the complexities of the case, stating, “The whole situation cries out for more cooperation… I had been ‘lying in bed at 3 a.m. trying to figure out what to do with this mess.'”

The Bahamian insolvency case commenced one day prior to FTX Trading and over 100 affiliates filing for bankruptcy protection in Delaware in November. The purpose of the bankruptcy filing was to address allegations of misusing and losing billions of dollars’ worth of customers’ cryptocurrency deposits. FTX founder Sam Bankman-Fried and several company insiders have been indicted on fraud charges related to the collapse of the company. Bankman-Fried is currently contesting the charges, while others have pleaded guilty and agreed to cooperate with prosecutors.