FTX bankruptcy hearing to consider customer privacy issue

Yahoo Finance’s Alexis Keenan joins the Live show to discuss the expectations for FTX’s court ruling on asset sales and customer privacy.

Video Transcript


- All right, attorneys for crypto exchange, FTX, are heading to bankruptcy court today in Delaware to ask for permission to auction off pieces of its business to keep customer names secret for at least six months, as it looks to recover lost funds. Let's dive into this one further here, guys. Some really big names tied to these legal proceedings here, Tom Brady, Robert Kraft, you name it, really catching some headlines.

- Right, and we're almost a year removed from the Super Bowl of crypto, if you will. That was last year that saw a flood of advertisements taking up a ton of the television time, and users, or viewers of the game rather, just having a consistent flow of information that was put in front of them trying to market crypto, whether that be a commercial that said nothing. And that one coming from Coinbase at the time. And then there were the range of other different athletes that were involved in those advertisers and those ads. And then the sponsorships and partnerships came to light as well in the weeks following that.

- Yeah, and there's an FTX hearing that's occurring this morning in bankruptcy court, so all of these dockets being filed is where we're getting all of this information. There's a lot coming through. Alexis Keenan has been monitoring it for us. Alexis, so a lot of dribs and drabs, or maybe more than dribs and drabs since we're getting a lot of information here.

ALEXIS KEENAN: Yeah, a little more. OK, so what Brad was just talking about is the release of the investors names, the equity investors that poured money into FTX in its infancy. But what the bankruptcy court is addressing today are arguments from-- well, they're addressing a lot of arguments.

But one of note is a group of news organizations, including the "New York Times," the "Financial Times," "Bloomberg," and others, they are saying that the public has a right to know the names of the customers of FTX. Now, typically in bankruptcy proceedings, the names of creditors would be disclosed, as would be their physical addresses, their email addresses. That's how these things go.

But in this case, a little bit different because you have a million-plus customers, all of whose privacy are, presumably, important to them. So that's the argument that FTX management is making against these news organizations. The management is saying we don't want to do that yet, Judge. Please give us six more months to protect the privacy of these customers.

They say also the EU has privacy laws that may jeopardize-- the company might violate EU laws by turning over these names in the US bankruptcy court. And they also say that the company's value could be jeopardized in its eventual sale. Remember, this as a Chapter 11 reorganization. This company is meant to emerge from bankruptcy. It's not a liquidation. They say that other companies in this space could more easily poach customers if the names are released.

- Just a little bit of precision here that I'm a little confused about. Many of these creditors were also investors in FTX. In other words, if you're talking about people want to know who the big clients are. That's really what you want to know about it. Nobody cares about who the-- if somebody invested, even if it was their life savings, a relatively small amount. You want to know who is at risk because they had put money at FTX now and lost that money. Isn't there a lot of crossover between that and people who invested in FTX, the company?

ALEXIS KEENAN: So yes and no. As a bankruptcy court would view these creditors, they're really different. And it's also an evolving idea in bankruptcy court of whether customers, or what type of creditor they are. Where do they fall in the hierarchy? And just take a look at the hierarchy in bankruptcy. How it works for creditors.

Up at the top, you have the administrative expenses just to keep the lights on, just to pay the lawyers, pay the bankers, pay the people who need to show up in order to keep this thing going. Then, you have secured creditors, unsecured creditors below them. These are the two spaces where maybe customers might fall. That would be a good thing, the higher up this hierarchy that could fall.

But then you see there at the bottom, the equity holders. That's who these investors are whose names were disclosed yesterday in bankruptcy filings, including Tom Brady and including Tiger Global, Sequoia Capital, SoftBank. You had Robert Kraft. You had the hedge fund managers, Paul Tudor Jones and Dan Loeb. So those are the people whose shares are likely now worthless. Customers, in this case, have a better chance of getting their money back, or some sense on the dollar, let's say.

- All right, we'll see if they provide that six months as well on the customer disclosures as well, and trying to protect those customers as well. We'll see what they do with the investors Thanks so much, "Yahoo Finance's" own, Alexis Keenan.