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Mad about the Celsius Customer Dox? Pray Your CeFi App Doesn’t Go Bankrupt

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Mad about the Celsius Customer Dox? Pray Your CeFi App Doesn’t Go Bankrupt

At least they didn’t include home addresses. 

Bankrupt crypto lender Celsius disclosed the names and transaction histories of its customers in a court filing Wednesday, infuriating the privacy-obsessed crypto community, but drawing a shrug from experts who say that kind of disclosure is common in bankruptcy proceedings. 

Chief Bankruptcy Judge Martin Glenn, of the Southern District of New York, denied Celsius’ request to redact customer names and filed the 14,000 page document Wednesday. The document included hundreds of thousands of names, as well as those users’ token deposits and withdrawals.

Celsius argued that disclosure of names and addresses would endanger its customers and make it possible for competitors to poach those customers, hobbling its comeback attempt. A committee of Celsius’ customers joined the company in asking the judge to redact identifying information. 

Breach of Privacy

Judge Glenn allowed Celsius to conceal individuals’ home and email addresses. Noting the “strong presumption … in favor of public access to court records,” however, he said Celsius had not proven its customers would be in danger if their names were made public. 

“This horrific breach of privacy will lead to many robbed & killed,” pseudomymous Twitter user foobar wrote. “Anything not provably cryptographically private will become public.”

Bankruptcy experts said the judge’s decision was to be expected, as the identities of creditors are routinely disclosed in these proceedings. Because Celsius users had lent the crypto platform their digitial assets, they are considered creditors in this case.  

“This is mainstream, routine decisionmaking – the court simply applying the statute to a particular situation,” Lynn LoPucki, a professor at the UCLA School of Law, told The Defiant. “There are more than a million bankruptcy cases every year. And in every one of those bankruptcy cases, they list the names and addresses of all the creditors. And, as you can imagine, there have been a lot of people that have been upset about that for decades.

“But there are important public policies for putting their names out there in public,” LoPucki continued. “We’re trying to operate an honest bankruptcy system, and you can’t do that without knowing who the participants are.” 

No Special Protection

In certain bankruptcy proceedings, customer identities are protected, noted Kenneth Klee, another professor at the UCLA School of Law. 

For example, “Stockbrokers and Commodities Brokers have special protections for customers in subchapters III and IV of Chapter 7 of the Bankruptcy Code,” he told The Defiant in an email. “There are no special protections for Crypto customers.”

Unless the information in question is a trade secret or “scandalous, or defamatory matter,” he added, “the general rule is public disclosure.”

In the event another crypto firm were to file for bankruptcy, its customers “should expect similar treatment,” Ronald Mann, Professor of Law at Columbia University, said in an email. 

Judges have some discretion however. In his ruling, Judge Glenn noted another judge in the Southern District of New York allowed bankrupt crypto firm Voyager Digital to redact the names of “‘Confidential Parties,’ including customers.” But he found that Celsius’ argument was “insufficient to justify the wholesale sealing of creditors’ identities.” 

Doxxing Risk

Those who took to crypto Twitter noted it would be trivial to match people in the filing to their self-custody crypto wallets, if not their exact real-world identities. 

“Extremely simple to doxx people on-chain using the celsius pdf it literally has all withdrawal txs, including token, time and exact amount,” pseudonymous software engineer 0xngmi, of crypto data firm Defi Llama, tweeted. “Extremely easy to match that against on-chain transfers.”

One Twitter sleuth has already done so to identify the wallet belonging to Krissy Mashinsky, the wife of Celsius founder and former CEO Alex Mashinsky. 

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LoPucki noted that firms representing clients like Celsius may shop around for a judge willing to redact customer information. 

“If it’s another crypto firm … they will search for the right place to file this kind of case,” he said. “There is an unusual sensitivity among crypto traders to the release of information about them.” 

It may take awhile to find the judge willing to do so. 

“It sounds like the judge did the right thing under existing law,” Klee wrote. “The issue is whether Congress should amend the law to protect crypto customers.  Reasonable people can differ on the answer to that question.”

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