FTX Advisors released customer information after FBI subpoena

FTX consultants Alvarez & Marsal (A&M) sent at least five US Federal Bureau of Investigation (FBI) offices information about FTX's clients' trades. The information was provided as part of an FBI subpoena during the bankruptcy of the crypto firm's court appearance.

According to FTX court filings, the FBI's Philadelphia office asked A&M for “information related to certain identities” on Amazon Web Services (AWS). The agency's Oakland and Portland offices requested customer information and specific transactions in July and August.

FTX exposed customer data

Additionally, FTX received subpoenas from the FBI's Cleveland and Minneapolis facilities. The consultants reportedly paid $21,000 to FTX's bankruptcy estate in July, August and September in response to FBI inquiries.

The FTX summons highlights how centralized exchanges provide users with their identities when they register. If the exchange complies with anti-money laundering regulations, the crypto wallet addresses assigned to customers can easily be linked to their real-world identities.

Exchanges can create a single point of failure by storing customer data in a centralized location, such as a cloud server. Hacking a cloud provider can put customers' assets at risk, similar to the recent breach of LastPass, the password manager that lost $4.4 million in crypto assets that contained keys to cryptocurrency.

FTX advisors are paid from FTX assets at different levels of liquidity. A court recently allowed FTX's borrowers to sell $100 million worth of crypto assets every week to reduce market volatility.

Read more: FTX Collapse Explained: How the Sam Bankman-Fried Empire Fell

How do crypto firms respond to calls?

U.S. crypto companies follow a subpoena process to limit the government's excessive access to customer transaction data. The agency must provide a probable cause legal basis to compel the exchange to transmit the requested information. This is to prevent law enforcement from trying to drum up criminal activity on fishing trips.

Sometimes, as Coinbase did in response to a subpoena from the US Internal Revenue Service (IRS), the exchange may want to limit the scope of the request. Coinbase fought the IRS' overly broad request and narrowed the scope of the subpoena to the wallet information of 15,000 US account holders.

The exchange previously said it received 12,320 law enforcement inquiries from October 1, 2021 to September 30, 2022. The United States was the largest single lawyer with 5,304 requests.

Read more: Final US Crypto Tax Guide for 2023

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