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FTX customers names will remain sealed for now, rules judge

The decision comes after a Jan. 8 filing by FTX’s lawyers, who argued that public disclosure could create an undue risk of identity theft or unlawful injury to FTX creditors.

The names of up to nine million FTX customers are set to remain confidential for at least three more months following the latest ruling in FTX bankruptcy proceedings. 

The decision was reportedly made by Judge John Dorsey in the Delaware-based bankruptcy court on Jan. 11 in response to a 168-page filing by FTX on Jan. 8, which requested the court to withhold confidential customer information.

Judge Dorsey said that he remains “reluctant at this point” to disclose the confidential information, as it may put creditors “at risk,” despite increased pressure from several media outlets:

“We’re talking about individuals here who are not present – individuals who may be at risk if their name and information is disclosed.”

Days earlier, FTX lawyers argued “that disclosure of the information would create an undue risk of identity theft or unlawful injury to the individual or the individual’s property” and that the court should use its “broad discretion” under the U.S. Bankruptcy Code to protect those affected by FTX’s collapse.

In late December, a group of non-U.S. FTX customers also pushed the Delaware bankruptcy court to keep customer information private, arguing in a Dec. 28 joinder filing that public disclosure would cause “irreparable harm.”

Judge Dorsey’s decision does however run contrary to most bankruptcy proceedings where creditor information is disclosed — which is what happened in cryptocurrency lender Celsius’ bankruptcy proceedings in October.

Related: Getting funds out of FTX could take years or even decades: Lawyers

The Delaware-based bankruptcy court hasn’t been as kind to FTX equity holders, having released a Jan. 9 document that disclosed the investors expected to be wiped out and the number of shares they held with FTX.

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Among those included NFL legend and former FTX brand ambassador Tom Brady, his ex-wife Gisele Bündchen, tech entrepreneur Peter Thiel and Shark Tank investor Kevin O’Leary.

It appears that progress is being made though, with FTX reported to have already recovered $5 billion in cash and cryptocurrency, FTX attorney Andy Dietderich said in a Jan. 11 statement.

According to early bankruptcy filings in November, more than 1 million creditors were speculated to be involved, with $3 billion being owed to the 50 largest creditors alone.

Celsius files to reopen withdrawals for a minority of customers

Celsius has motioned for $50 million worth of the total $225 million held in the Custody Program and Withhold Accounts to be released to owners.

Beleaguered crypto lender Celsius Network has filed a motion with the United States Bankruptcy Court yesterday to allow customers with digital assets held in certain accounts to be withdrawn. 

There’s a catch, however, as the motion will only apply to Custody and Withold Accounts and for custodied assets worth $7,575 or less in value.

Celsius has structured their Custody and Withhold Accounts, which essentially serve as storage wallets, in a way that still enables users to maintain legal ownership of cryptocurrency.

This ownership, however, is not extended to assets held in accounts that offer annual crypto earnings or borrowing services (Earn and Borrow accounts).

The community response to the motion has been mixed, with creditors happy that Celsius Network has conceded funds held in its “Custody Program and Withhold Accounts likely do constitute property of their estates.”

However, as tweeted by BnkToTheFuture.com CEO Simon Dixon — the community believes the amount Celsius wants to release is far short of what is equitable.

As Dixon points out, only $50 million of the $210 million held by 58,300 users in custody accounts is set to be released, with all funds above $7,575 which were transferred from the Earn Program and Borrow Program into Custody and Withhold accounts not included within the released amount.

The $7,575 amount is referred to as the “statutory cap” and Celsius is unable to avoid transferring amounts less than this total upon creditor requests as per section 547(c)(9) of the Bankruptcy Code. 

The filing also mentions that an additional $15.33 million is held in Withhold Accounts by approximately 5,000 customers as of Monday

To attain that $50 million figure, Celsius lawyers have distinguished between “Pure Custody/Withhold Assets” and “Transferred Custody/Withhold Assets,” with “Pure” assets those which were not transferred from the Earn or Borrow Programs. This division of funds has not been well received by community members.

In response to a Friday Twitter post from Celsius, countless community members have made it known that they want nothing short of all their funds back.

Celsius states that assets locked in the Earn and Borrow Programs are likely property of their estates, with transfers of these assets to Custody or Withhold accounts being described as “a transfer of the Debtors’ property to customers.”

Within the filing, Celsius states that the “relief sought in this Motion may not be supported by every customer or stakeholder, and that it may not go as far as some Custody Program customer and Withhold Account holders may wish.”

It suggests the motion is merely a “first step forward, and not the last word on, efforts to return assets to customers.”

Related: Celsius bankruptcy proceedings show complexities amid declining hope of recovery

The motion comes just one day after an ad hoc group of 64 custodial account holders filed a complaint alleging that title to custody assets “always remains with the user” as per the accounts’ terms of use, with the group seeking to recover more than $22.5 million worth of assets.

A hearing on the motion is scheduled to be held on Oct. 6, and as it stands, users have had their assets locked up on the platform for more than two months.