FTX creditor information to remain confidential, at least for now

The judge overseeing the bankruptcy case of fallen crypto exchange FTX today agreed to keep names and addresses of the top 50 creditors—owed approximately $3.1 billion—redacted for now.

Judge John Dorsey made the decision Tuesday at the Delaware bankruptcy court during FTX’s first hearing.

Judge Dorsey also said he would formally move a Chapter 15 bankruptcy case filed by Bahamian liquidators from New York to Delaware. Regulators in the Bahamas previously wanted to take control of FTX’s bankruptcy proceedings.

“On an interim basis I’ll enter the order allowing for the redaction of the names and addresses,” said Judge John Dorsey of the U.S. Bankruptcy Court, District of Delaware. “Everyone in the room knows the internet is wrought with potential dangers.”

James Bromley, counsel to FTX’s new management, described the fall of the exchange as one of the “most abrupt and difficult collapses in the history of corporate America,” during the highly publicized case.

A document filed Saturday by FTX showed the exchange owes $3.1 billion to its top 50 creditors. Bromley added that ex-FTX CEO Sam Bankman-Fried also used digital asset exchange FTX as his “personal fiefdom.”

“We oppose the redaction of the names and addresses of customers who are not individuals,” said Benjamin Hackman, an attorney with the office. “There should be transparency about who those entities are, especially on the top 50 list.”

Making creditor information public is standard practice in U.S. bankruptcy proceedings, although Celsius creditors were upset after a similar disclosure in that proceeding.

Lawyers for FTX and the other companies falling under its corporate umbrella argued in favor of keeping as much of the information as possible redacted. The company wanted to keep that information confidential not only due to privacy concerns, but also because it views its customer list as an asset.

“The debtors’ customer list, numbering in the millions, is an asset of the estate,” argued Brian Glueckstein, a partner with Sullivan and Cromwell, which is representing FTX in the bankruptcy proceedings. “Public release of the customer list would give the debtors’ competitors a free opportunity to poach the debtors’ customers and would interfere with the ability to sell assets and maximize value as these cases progress,” he continued.

Glueckstein also argued that “there are significant privacy concerns raised by the disclosure of this protected creditor information. The debtors’ customer base is global. Those customers who reside in the United Kingdom and the European Union member countries have additional data privacy protections under local law.”

Despite the judge’s interim order keeping creditor information redacted, the U.S. Trustee will still have access to that information on a confidential basis. An additional hearing on the subject is expected next month.

FTX lost billions of dollars of investors’ cash when it imploded earlier this month.

The exchange was allegedly using client money to make risky investment bets through Alameda Research, a trading firm founded by Bankman-Fried.

After a bank run on the exchange, the company was forced to admit it did not hold one-to-one reserves of customer assets, which culminated in a freezing of withdrawals and subsequent bankruptcy filing.