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Debate persists: Should FTX disclose consumer names?

In this post:

  • The crypto community continues to witness the dispute over whether or not to reveal the names of customers at collapsed crypto exchange FTX.
  • Analysts argue that disclosing the names of the customers would “impair the debtors’ ability to maximize the value that it currently possesses.”
  • The top 50 FTX creditors are owed an estimated $3.1 billion.

Kevin Cofsky, a partner at Perella Weinberg Partners, testified in the ongoing discussion around the revelation of user names at the now-defunct crypto exchange FTX, arguing that doing so would impede efforts to retrieve assets and reduce value. Despite media organizations’ calls for public disclosure, top creditors have preferred anonymity. Sam Bankman-Fried, the CEO of FTX, is accused of many financial offenses.

Media outlets advocate for public disclosure of FTX creditors’ names

According to reports from top media houses, the debate over whether or not to disclose the names of consumers at the defunct cryptocurrency exchange FTX is still going on. Kevin Cofsky, a partner at the investment firm Perella Weinberg Partners, testified at a hearing on June 8 that disclosing the customers’ names would hinder the closed exchange’s efforts to collect and sell assets to pay creditors.

The job of starting the sale of FTX, which abruptly and unexpectedly declared bankruptcy in November, has been given to Perella Weinberg. Cofsky emphasized his position during the Wilmington hearing in Delaware, claiming that the value would decrease due to the exposure of names, regardless of the organization responsible for it.

According to Cofsky, disclosing the names of customers would hinder the debtors’ capacity to optimize the current value it holds. FTX has previously maintained that revealing the names of their creditors could expose sensitive information and jeopardize their security. The New York Times, Dow Jones, Bloomberg, and the Financial Times, among other prominent media organizations, have advocated making FTX’s debtors’ names public. 

Institutional creditors, which included companies like Apple, Netflix, and Coinbase, were disclosed in court records in January. However, how much money 9.6 million distinct clients owed the failing exchange is still being determined. The top 50 FTX creditors owe the company an estimated $3.1 billion and repeatedly told the court that they prefer to remain anonymous. 

The collapse of FTX last year was widely reported. Prosecutors claim that the exchange was criminally mismanaged, and Sam Bankman-Fried, the CEO and co-founder, was detained in December. The Southern District of New York’s Complex Frauds and Cybercrime Unit initially filed eight financial crime charges against the disgraced crypto tycoon, well known as SBF.

After entering a not-guilty plea in January, he was charged with additional offenses in February. He now faces 13 accusations, including conspiracy to commit wire fraud and conspiracy to defraud the U.S., and violating campaign finance rules.

FTX denied continued protection for U.K., E.U., and Japanese debtors and equity holders

Sam Bankman-Fried, the company’s founder, has entered a not-guilty plea to allegations that he defrauded investors and used client funds to support dangerous trades at his cryptocurrency hedge fund trading company, Alameda Research, expensive real estate acquisitions, and political campaign donations. Three former FTX executives have admitted guilt to allegations of fraud and are working with the authorities.

In January, Dorsey issued a decision authorizing FTX to exclude for 90 days from court filings the identities of any consumers as well as the addresses and email addresses of non-individual customers. Additionally, he permitted FTX to permanently hide the identities and email addresses of specific debtors and stockholders.

According to a report from Economictimes, the judge approved the permanent sealing of the identities of specific clients and an additional 90-day period of client name confidentiality for institutions on June 9.

However, Dorsey declined to continue allowing FTX to conceal the names of specific debtors or equity holders who are residents of the United Kingdom or other European Union countries and protected by the General Data Protection Regulation, or GDPR, a consumer protection initiative. FTX requested a similar treatment for those covered by Japanese data privacy regulations.

According to Dorsey, FTX has not provided any evidence to support the claim that those overseas persons may suffer harm or that FTX might face sanctions if their names are made public in response to a U.S. trustee’s objection.

In addition, Dorsey turned down a legal team’s demand that the members of an ad hoc committee of non-American clients remain anonymous. He ruled that if the committee wishes to participate in the case, the identities of its members must be made public.

According to redacted court filings, the ad hoc committee has 35 members, with estimated financial stakes in FTX ranging from $64,434 to $1.5 billion. According to Dorsey, some members might choose to depart in light of his decision.

Disclaimer. The information provided is not trading advice. Cryptopolitan.com holds no liability for any investments made based on the information provided on this page. We strongly recommend independent research and/or consultation with a qualified professional before making any investment decision.

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