Defendants in a $37 million cryptocurrency fraud lawsuit have requested that Bermudian-based witnesses in the case be given anonymity because their involvement might damage their reputations.

Arbitrade Bermuda is facing multiple fraud charges levelled by the US Securities and Exchange Commission in 2022.

The firm promised to create hundreds of jobs by setting up its headquarters in Bermuda in 2018 as the island moved to secure a global position as a fintech hub and regulator.

However, according to the SEC, the company orchestrated a “pump-and-dump” scheme and misled investors when it claimed that it had acquired $10 billion in gold bullion to back a cryptocurrency token.

Lawyers for four defendants — Troy Hogg, James Goldberg, Stephen Braverman and Max Barber — filed a motion for a limited protective order for non-party witnesses in the Southern District of Florida court, according to the website OffshoreAlert.

The motion states: “Since the SEC filed the complaint, there has been significant press coverage of the lawsuit, particularly in Bermuda, where Arbitrade is based.

“Defendants intend to depose several non-party witnesses located in Bermuda who have information relevant to the issues in the lawsuit.

“Those witnesses are concerned, however, that their involvement in the lawsuit, even in the capacity of non-party witnesses, or their substantive testimony might result in negative publicity and embarrassment.

“These witnesses, all of whom are located in Bermuda and thus cannot be compelled to appear pursuant to a subpoena issued by this court, have stated their willingness to testify is contingent on protection from the court.

“Accordingly, to enable these witnesses to testify at deposition without the risk of undue embarrassment or annoyance, defendants request entry of a protective order pursuant to which these witnesses’ depositions can be treated as non-public and confidential.”

The request went on to cite US protective-order regulations that can be granted at the discretion of the courts to prevent the disclosure of information “that could be damaging to reputation and privacy”.

It said: “Good cause exists for the entry of such an order here.

“The witnesses who defendants seek to depose are non-parties and have expressed fear and concern regarding the potential for personal and professional embarrassment or negative publicity that is likely to occur if their involvement in this action is made public.

“That fear is not speculative — the witnesses all live and work in Bermuda, where this case has been covered extensively by local media sources.

“Thus, an order authorising the parties to designate the depositions of these non-party witnesses as confidential — and prevent their involvement from being made public — will enable the witnesses to testify without the fear of negative personal and professional consequences.”

The motion also noted that defence lawyers had contacted SEC attorneys, who had objected to the request.

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