FTX's Creditors Remain Under Wraps, For Now -- But NYT, WSJ And Others Are Right: Pretty Soon, Their Names (At Least) Should Be Disclosed.

This is a delicate situation, that I will grant you. There are several crypto- market players who've already been toppled by the amounts that it is clear they cannot recover from Alameda/FTX; and many of the larger creditors are unlikely to ever see more than a dime on the dollar. So it is easy to imagine "bank runs" on firms that are at least surviving for now, if the capital market arbitragers were to learn that the exposures to FTX render them insolvent, as well. So for the moment, until a better sense of whether more may be available to pay them is disclosed. . . perhaps they should remain. . . masked, in Delaware.

We already have seen the dollar figures. They reach in to the middle hundreds of millions, in some cases, and in total are well over $4 billion now. So the public does have a sense of the size of the problem SBF created, for all of crypto-. And with perhaps ~$7 billion in FTX/Alameda customer funds missing, in the aggregate. . . this is all quite dire.

But it is also true. . . that in America, the presumption is that courts function best in the bright light of day. And that is precisely what some able lawyers for major media (NYT and WSJ and Bloomberg among them) now argue: the First Amendment, and the free press clause, in particular. . . dictates that the names need to be made public -- so that the public may be confident that all names are being provided equal, and not greater protection, under the law. The bankruptcy laws.

I think they will prevail, though it may be a few months yet before they do. At some point, it will become clear how much each (or what a small percentage each) will get, and then it should all be shown to the public. But what about between now and then?

Me? I'd propose an unusual solution: there is no reason not to shuffle the names several times, like a Vegas casino's four deck shoe. . . from the list that has the figures already disclosed. . . and then simply publish the names. No figures. There will be no way to know whether a given name is owed a few hundred thousand dollars -- or a few hundred million. But that would help all market participants have polite (but firm) discussions with the parties involved. . . and at least try to protect themselves. Or begin to get into a defensive posture, to do so.

But now -- we will have to wait and see. . . whether the federal courts see it the way the media lawyers see it:

. . .The bankruptcy filing is of significant and legitimate public concern given FTX’s leading role in cryptocurrency, the scale of potential mismanagement and wrongdoing, the reputational and financial impact of its collapse on the cryptocurrency field, the scale of creditors’ losses, and the related, collateral financial impact on third parties and markets. . . .

Records in these proceedings indicate that potentially more than a million creditors will be affected. D.I. 45 ¶7 (“the Debtors have hundreds of thousands if not over one million creditors and other parties-in-interest”). The Media Intervenors and other news organizations have been closely reporting on these proceedings and issues.

Debtors have been accused of lack of transparency in their business. That mindset appears to have carried over to this bankruptcy, as they have taken the extraordinary step of seeking to keep under seal their list of creditors. . . .

Indeed. The time is coming, but why not release a random-order list of just the names? No amounts -- no addresses. Just corporate names. That is a sensible middle ground. And it will allow collateral partners of these creditors the ability to at least try to limit the carnage. Do it.

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