Former primary counsel for FTX, Fenwick & West LLP, is facing a class-action lawsuit that accuses the law firm of aiding the alleged multi-billion dollar fraud conducted by the crypto exchange. The lawsuit, filed by a group of FTX customers in a California District Court on August 7th, claims that Fenwick & West established several “shadowy entities” that allowed FTX co-founder Sam Bankman-Fried and other executives to engage in fraudulent activities.
According to the lawsuit, Fenwick & West went beyond the usual services provided by a law firm, such as structuring acquisitions by FTX US in ways that evaded regulatory scrutiny and supplying staff to execute the strategies proposed by the law firm. The suit further alleges that these “shadowy entities,” including North Dimension and North Wireless Dimension, were used to siphon misappropriated funds from FTX customers.
The plaintiffs argue that Fenwick & West not only aided and abetted FTX’s fraud but also chose not to intervene in a series of misrepresentations made by the exchange to its customers. They claim that there was an implied agreement between FTX US, other FTX affiliates, and Fenwick & West to deceive customers, with the law firm standing to gain financially from FTX’s alleged misconduct.
The class-action lawsuit lists Sam Bankman-Fried, former Alameda Research CEO Caroline Ellison, former FTX co-founder Gary Wang, and former FTX engineering lead Nishad Singh as the four FTX insiders involved in the alleged fraud. This is not the first time Fenwick & West has been named in a class-action lawsuit related to FTX. A similar lawsuit filed in February also alleged that the law firm assisted Bankman-Fried and FTX in setting up their business.
In response to these allegations, Fenwick & West recently hired Gibson Dunn, another law firm, to assist with legal matters related to its alleged role at FTX. The law firm is currently under scrutiny for its involvement in the collapse of FTX, which filed for bankruptcy in November 2022 due to its inability to process a large volume of customer withdrawals.
Sam Bankman-Fried, the co-founder of FTX, is currently under house arrest and facing 12 charges, including wire fraud, conspiracy, and money laundering. He is set to have two criminal trials in October and March. Prosecutors announced on August 8th that they plan to re-add a charge related to illegal campaign finance, which was previously dropped due to potential treaty violations with the Bahamas.
Cointelegraph reached out to Fenwick & West for comment but did not receive an immediate response. The ongoing legal battle between FTX and its former primary counsel highlights the extent of the alleged fraud and the potential consequences for all parties involved.
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