In the ongoing struggle to maintain transparency in the rapidly evolving landscape of cryptocurrency exchanges, four US media outlets – Bloomberg, Dow Jones, The New York Times, and The Financial Times – continue to push for the revelation of non-US FTX customers’ identities. This comes after an initial objection filed on January 11 when the Official Committee of Unsecured Creditors and FTX sought to withhold customer information.
Despite having previously heard arguments by these media companies, the court received another objection on May 3, questioning the legal basis for withholding customers’ names in accordance with non-US data privacy laws. The media giants contend that US constitutional and statutory rights dictate the public’s strong presumptive right to scrutinize bankruptcy filings. They argue that Section 105 of the Bankruptcy Code, which provides judicial power to the bankruptcy courts, does not permit foreign law to take precedence over access to information in the US.
Supporters of this transparency argue that avoidance of public disclosure requirements mandated by US bankruptcy law is insufficient grounds for sealing information. Opponents of this argument, however, raise concerns about the impact of revealing confidential customer information on foreign investors and the potential risks they may face upon disclosure.
Among the concerns presented in the media outlets’ objections are two central issues. The first is whether FTX’s creditors’ names should be considered “confidential commercial information.” This issue was initially raised in an earlier filing, and it questions the need for protecting the identities of those involved in the bankruptcy proceedings. The second issue addresses the possible implications of disclosure for the creditors themselves. It suggests that revealing names would not place the creditors at “undue risk.”
FTX’s response to these objections, as well as the Committee’s stance, remains to be seen, with both parties having until May 4 at 4:00 pm Eastern Time (ET) to submit an objection. The hearing for the filing will occur on May 17 at 1:00 pm (ET).
As cryptocurrencies and exchanges face an ever-increasing amount of scrutiny, the question at the core of this debate is: can we trust crypto exchanges, following the collapse of FTX? While the push for transparency and the right of access to information are vital in promoting trust and accountability in the market, necessary precautions must also be taken to protect the privacy and interests of individual investors. The outcome of this case could set the stage for future regulation and governance within the crypto exchange industry.