News organizations challenge court decision on FTX customer privacy

By Dietrich Knauth

NEW YORK (Reuters) – A group of media organizations on Friday appealed a court decision that allows collapsed crypto exchange FTX to keep customer names secret during its bankruptcy case.

U.S. Bankruptcy Judge John Dorsey in Wilmington, Delaware, ruled earlier this month that FTX did not have to reveal its customers’ names because doing so could expose them to identity theft and other scams. Bankrupt companies are typically required to reveal the names of their creditors and the amounts of debt they hold, including those of individual customers, but U.S. bankruptcy law contains an exception for information that would create undue risk of identity theft or other injury.

Bloomberg, Dow Jones & Company, The New York Times Company and the Financial Times appealed Dorsey’s ruling. Their attorneys have argued that FTX is not entitled to a “novel and sweeping exception” to bankruptcy’s typical disclosure requirements simply because its customers used cryptocurrency.

FTX has argued that cryptocurrency users face heightened risk of scams and identity theft and pointed to the recent bankruptcy of crypto lender Celsius Network to show what kinds of scams can result when customers’ names are revealed.

After the judge in the Celsius case ordered customers’ names be revealed, Celsius users saw an increase in phishing attacks from scammers who posed as bankruptcy attorneys and Celsius employees, according to FTX’s court filings.

FTX said it had approximately 9 million users who might be targeted by scams if their names were revealed.

FTX did not immediately respond to a request for comment. Attorneys for the media organizations did not immediately respond to a request for comment on their appeal.

FTX Trading and more than 100 affiliates in November filed for bankruptcy protection in Delaware to address claims that the company misused and lost billions in customers’ crypto deposits. FTX founder Sam Bankman-Fried has pleaded not guilty to criminal charges accusing him of stealing billions of dollars from customers to plug losses at his hedge fund.