FTX Creditors: Maybe at Risk? (Anonymity Can Help)

(FTX) bankruptcy creditors face a serious risk of identity theft, asset theft, personal attack, and further online victimization, if their identity is not kept anonymous, according to a former US Secret Service crypto specialist Jeremy A. Sheridan.

Sheridan, who is the managing director of a crypto/blockchain-focused practice at FTI Consulting Inc, believes revealing the details of FTX customers who possess crypto holdings is similar to “placing a target on their back and facilitating fraudulent schemes by malefactors.”

Jeremy A. Sheridan pointed out that the likelihood of targeted crimes against the currently redacted FTX creditors will drastically increase due to the revealed information. He added that the disclosure of the debtors’ schedules of assets and liabilities list, and the customers’ respective cryptocurrency holdings, will create a “menu of potential targets” for malefactors.

FTI is acting as a financial advisor to out-of-pocket creditors in the FTX bankruptcy case.

The 10 largest creditors are owed a minimum of $100 million each, and all 50 creditors are due upwards of a combined $20 million. These large sums of money will attract cybercriminals and other malicious actors who will seek to exploit the disclosed information to their own advantage.

Sheridan urges the court to protect FTX creditors from the dangers of identity theft and other cybercrimes by keeping their identities anonymous. He believes that this is the only way to ensure their safety and to prevent potential online victimization. As such, he requests the court to ensure only the creditors’ respective cryptocurrency holdings are revealed and the rest of the information is kept confidential.

Last year, the FTX bankruptcy judge made a controversial decision to keep the names of the 50 biggest unsecured creditors that are collectively owed $3.1 billion redacted. This is despite the fact that under the US bankruptcy code, the details of creditors would normally be made public.

Bloomberg News and the US Trustee argued to make the names of FTX creditors public but were unsuccessful in their attempts. This decision has significant implications, as it leaves the FTX creditors open to the dangers of cybercrime. In the past, similar cases have seen user details leaked after judges failed to redact the details from over 14,500 pages of filings.

Sheridan believes that the sophistication of these attacks has increased significantly in recent years due to the advancement of artificial intelligence programs such as ChatGPT, which can easily replicate human content and language.
As a result, potential victims may no longer be able to detect the telltale signs of a scam such as poor grammar, typos, or recycled narratives. This puts FTX’s creditors at risk of falling victim to cybercrime if their names remain public.

In Summary

The FTX bankruptcy case highlights the need for anonymity to protect creditors from identity theft, asset theft, and personal attacks. This case underscores the importance of safeguarding personal information in an era of increasingly sophisticated cyber threats.