FTX bankruptcy case inches closer to potentially naming creditors

Lawyers for beleaguered crypto exchange FTX did not object to media arguing in the firm’s bankruptcy case, taking a step toward potentially identifying customers tied up in the collapse.

Media outlets including The New York Times and Bloomberg recently filed a motion in the FTX case to make creditor information public, citing public interest. Lawyers for FTX, however, want to keep the creditor list private. A federal judge moved to keep FTX creditors anonymous on a temporary basis in November. 

Both parties appeared before a Delaware bankruptcy court judge Friday morning to hash out how the court would handle the disagreement. FTX has more than 100,000 creditors, and the top 50 could be owed $3.1 billion.

“We are already starting a process of names dribbling out,” said David Finger, the attorney representing media outlets seeking to intervene in the case. “The names are going to come out eventually.” 

Finger noted that some FTX creditors have already become public after the U.S. Trustee in the case identified members of a creditors committee. FTX attorney Brian Gluckstein did not object to media outlets arguing in the case.

“The debtors do not object to the media outlets intervening for the sole purpose of permitting the court to hear their objection to the debtors’ motion,” said Gluckstein, a member of the Sullivan and Cromwell law firm. “That motion is not being heard on the merits today. It will be heard at a future hearing.” 

The next hearing on that matter in the bankruptcy case is set for Jan. 11.

Lawyers for FTX also said they no longer wished to keep an indemnification and exculpatory motion under seal. They previously asked the court to keep a motion under seal because the firm worried it would reveal some details of their asset recovery efforts. Assets worth hundreds of millions of dollars were transferred from FTX the night the firm filed for bankruptcy. Now, lawyers say FTX has made progress in the recovery and they are comfortable with unsealing the motion.

FTX filed for bankruptcy protection in November, after a run on its FTT token decimated the exchange. The firm was once valued at $32 billion, and the company’s bankruptcy filing includes more than 100 related entities. 

Former FTX CEO Sam Bankman-Fried was charged with fraud this week after being arrested in the Bahamas. Bankman-Fried is accused of using FTX customer funds to prop up his trading firm, Alameda Research, among other misdeeds.

The disgraced crypto boss was denied bail and is being held in a Nassau prison until a February court hearing, in criminal proceedings separate from the bankruptcy case. 

Disclaimer: Beginning in 2021, Michael McCaffrey, the former CEO and majority owner of The Block, took a series of loans from founder and former FTX and Alameda CEO Sam Bankman-Fried. McCaffrey resigned from the company in December 2022 after failing to disclose those transactions.