Media companies including the New York Times and Bloomberg will be allowed to formally plead for FTX to publish the full list of as many as a million of its creditors, U.S. Judge John Dorsey ruled Friday.
Since the crypto exchange collapsed Nov. 11, bankruptcy hearings to restore funds to those owed money are still bogged down in procedural questions, including whether to grant access to liquidators undertaking parallel proceedings in the Bahamas.
FTX had sought to keep a list of its creditors – all of its former users and parties to which it currently owes money – sealed and redacted, arguing it was an “asset” that could be useful further down the line of its bankruptcy process. Government officials and reporters pushed back, arguing that the list of names should be shared as bankruptcy hearings are normally public.
Disclosure “ is a basic premise of bankruptcy law ... fundamental to the operation of the bankruptcy system and ... the best means of avoiding any suggestion of impropriety that might or could be raised,” U.S. Trustee Andrew Vara said in a Dec. 12 filing. “The public has a right of access to judicial records.”
Vara is a U.S. Department of Justice official charged with aiding the bankruptcy process.
Dorsey, a federal judge with the U.S. Bankruptcy Court of Delaware, said he approved of letting the media organizations, which also include the Financial Times and Dow Jones, intervene in favor of transparency, with a fuller hearing to be held on Jan. 11.
The media organizations sought to intervene in favor of publication in a Dec. 9 filing, making allusion to the poor record-keeping that appears to have plagued FTX’s governance.
“Debtors have been accused of lack of transparency in their business,” the legal filing by the media said. “That mindset appears to have carried over to this bankruptcy.”
The argument is whether to publish creditors’ names, and it’s likely that contact details such as email addresses for the creditors would still be kept private under any deal.
The move echoes a similar step in the bankruptcy hearing of crypto lender Celsius Network, which led to fears that exposing information about financial affairs could make users targets for harassment or theft.
The case is also facing a widening jurisdictional dispute between the U.S. and the Bahamas, where CEO Sam Bankman-Fried ran the company and where he is currently imprisoned.
Jason Zakia, an attorney representing liquidators in the Bahamas, told Dorsey that allegations that Bahamian authorities had used access to systems to favor payments to local residents were “wholly without merit … the Bahamian legal system is an independent legal system that should be respected.”
“We can't even really begin to do our job in the Bahamas” without being granted access to FTX’s cloud-based platform, Zakia added, but said he would be content to have static access to data rather than a live link to the system. Dorsey is due to rule on that question at a Jan. 6 hearing.
CORRECTION (Dec. 16 16:30 UTC): Clarifies the jurisdictional dispute is between the U.S., not FTX US, and the Bahamas.
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