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The beleaguered cryptocurrency marketplace, FTX, received legal approval last Friday to withhold customer identities in all bankruptcy proceedings. A U.S. court ruling reinforced the company's stance that public disclosure of these identities could foster fraudulent activities and identity theft.
Delaware's U.S. Bankruptcy Judge, John Dorsey, played a pivotal role in this decision. He granted FTX the perpetual right to obscure customer identities in its bankruptcy documentation. The ruling was based on substantial evidence demonstrating the potential risks associated with revealing these identities, even if certain personal information like email addresses remained undisclosed.
Earlier in January, Judge Dorsey had allowed FTX to temporarily conceal the identities of nine million individual customers. On the same day, he also permitted the temporary erasure of business entities and institutional investors from FTX's client registers. Judge Dorsey specified that FTX would need to resubmit the request within three months. While recognizing that these customers faced different risks from individuals, their identities could become valuable assets if FTX decides to sell its cryptocurrency exchange or client lists independently.
Judge Dorsey also addressed a disagreement between the U.S. bankruptcy representatives of FTX and the liquidators managing the dissolution of FTX's Bahamian subsidiary, FTX Digital Markets. He instructed both parties to appoint a mediator to prevent conflicting judgments in separate court cases in the U.S. and the Bahamas.
Dorsey rejected the Bahamian liquidators' request to initiate litigation in Bahamian courts over assets held by U.S. debtors. Last Thursday, he made it clear that he would not defer to a Bahamian court's judgment regarding which FTX entity should take control of assets and assume the responsibility of compensating customers. On Friday, he reaffirmed this stance, expressing no expectations that Bahamian courts would follow his directives.
