The collapse of several cryptocurrency platforms this year is testing the industry’s promise of user privacy as bankruptcy courts weigh if millions of individual customers’ identities should be revealed to the public, the Wall Street Journal reported. Hundreds of thousands of customers of Celsius Network LLC have already lost their anonymity because of its chapter 11 filing after a court ruling in September forced it to disclose its account holders’ names and coin balances. A different bankruptcy court is expected to consider next month if failed crypto exchange FTX can seal information on its customers’ identities and contact information from its publicly-available filings. Government lawyers and media organizations are opposing FTX’s efforts to seal its customers’ information, saying it hasn’t provided enough evidence to justify curtailing the public’s right of access to judicial records. “One of the biggest selling points of crypto is the anonymity,” but the notion becomes an issue in bankruptcy courts that require transparency, said Joanne Gelfand, a bankruptcy lawyer with Akerman LLP. “Many people believe that the anonymity only protects wrongdoers, that the anonymity enables thieves and fraudsters to transfer money and not be accountable,” she said. “Other people look at it as a personal individual right-to-privacy issue.” Lawyers representing crypto firms have urged courts to err on the side of redacting information, saying that disclosure will only reduce whatever value the businesses have left and harm customers who are already facing financial losses. The turmoil in cryptocurrency markets this year has already hurt crypto’s credibility with the investing public as plunging asset prices blew holes in the balance sheets of lenders, exchanges and hedge funds. The resulting bankruptcies blocked millions of individuals and institutions worldwide from accessing their crypto and exposed how some platforms weren’t as careful with customer funds as they let on.
