Apr 22, 2023

Secret Service Warns FTX Customers at Risk of Theft

As the crypto space continues to grow, so does the risk of fraud and theft. This was recently highlighted by Jeremy Sheridan, a former assistant director of the United States Secret Service Office of Investigations and current managing director for FTI Consulting, who warned that certain FTX customers could become targets if their personal information were to be made public.

In an April 20 declaration filed with the U.S. Bankruptcy Court for the District of Delaware, Sheridan supported a motion from the debtors that would withhold “certain confidential information” of FTX users. According to Sheridan, releasing the names of customers associated with the failed crypto exchange would impose “a severe and unusual risk of identity theft, asset theft, personal attack, and further online victimization.”

Sheridan argued that if individual customer names were made public in the Chapter 11 cases, it would provide potential malefactors with a list of vulnerable targets, as well as their respective cryptocurrency holdings. He noted that this would put FTX users holding large amounts of crypto at risk of fraud by scammers looking at their wallets.

Sheridan cited examples of common online scams conducted through email and social media, including building fake business and romantic relationships, SIM swaps and phishing attacks. He concluded that perpetrators of frauds and online attacks are “emboldened by, motivated from and attracted to high profile cases like the Chapter 11 Cases,” particularly due to the fact that cryptocurrency is easy to liquidate, instantaneous, global and pseudo anonymous.

A list of creditors owed money by the exchange was released by the legal team representing FTX debtors in January. However, the roughly 10 million users’ names and personal information had been redacted. A group of media outlets, including Bloomberg and The New York Times, has objected to the redaction, claiming that the press and public had a “right of access” to the information.

Judge John Dorsey extended the time that customer information could be redacted until April 20, also expressing concern that users could be put “at risk” with their names going public. FTX debtors and the committee of unsecured creditors filed a motion when the extension was set to expire requesting the bankruptcy court revisit the redaction order. The matter is scheduled for a May 17 hearing, depending on objections filed.

The collapse of FTX has raised many questions about the security and trustworthiness of crypto exchanges, and the need for users to take extra precautions when using them. As the web3 space continues to expand, there is a growing need for NFT marketing and NFT promotion services, as well as NFT marketing agencies and web3 agencies to help users navigate the space and protect their assets. Companies like these can provide valuable guidance to users on how to safely buy and sell NFTs, and how to use Twitter NFT marketing to maximize their NFTs’ potential.

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