By Michael Scott
BlockFi lenders urge the New Jersey Bankruptcy Court to conceal their data in the ongoing court trial. The lenders cited that publishing the creditors’ list would increase cyber-related crimes.
Undesirable Violation of Bankruptcy Law
According to the US Bankruptcy Law Chapter 11, the court is tasked to publish a debtor disclosure report comprising a list of assets held and liabilities owed by the debtor. This report prohibits the creditor from taking official action on the claimed assets.
Following the ongoing crypto winter and the FTX collapse, the US regulators have waded into the crypto operations. Citing the downfall of leading crypto players and the exposure of other crypto lenders and exchanges to the liquidity crisis, the regulators have heightened oversight into the crypto space.
Last year the distressed crypto lender Celsius Network failed to pass through Chapter 11 of the bankruptcy law. The court published a Celsius customer list that included over 600000 accounts and customers’ personal information.
The court action triggered criticism from the crypto community. It triggered a series of speculations that the publication of the client list would expose the parties to cybercrimes.
The crypto community argued that disclosing customers’ personal information triggered the risk of impersonation and encouraged hacking activities.
Notably, the Celsius saga prompts BlockFi creditors to oppose the court decision firmly. The creditors are urging the authority to seek alternative options to avoid a similar situation this year.
Court Enacts Bankruptcy Law
In addition, an expert on Bankruptcy matters from the US Department of Justice (DOJ), Andrew Vara, vehemently reaffirmed that disclosure is a crucial feature of bankruptcy law. Vara compared BlockFi’s situation with the Bahama now-bankrupt FTX.
The disclosure of FTX creditors lists has created mixed reactions among crypto entrepreneurs and regulators. Reportedly, leading media companies such as Bloomberg and New York Times support the enactment of Chapter 11 on FTX.
The BlockFi creditor committee is also debating publishing the creditors’ list. The committee regrets that the listing will affect the value of the BlockFi assets. They also declared that listing would expose the lenders to crypto crimes.
Citing Luke Dashr, the famous Bitcoin developer case, the committee expressed their fear of the ongoing hacking activities that exposed Dashr to suffer losses.
Currently, the committee is waiting for Michael Kaplan, a judge at the Bankruptcy Court, to reconsider his decision on the January 17 court hearing.
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