FTX customers have filed a class-action lawsuit against Fenwick & West LLP, the former primary counsel for FTX, alleging the law firm’s involvement in the alleged multi-billion dollar crypto exchange fraud. On August 7th, a group of FTX customers claimed in a filing that Fenwick & West had established “shadowy entities,” enabling FTX co-founder Sam Bankman-Fried and executives to employ “creative but illegal strategies” for fraud.
The suit alleged that Fenwick & West offered services beyond typical law firm responsibilities. These services included tasks like formulating acquisition structures for FTX US to evade regulatory oversight and providing personnel for executing strategies.
The “shadowy entities” called North Dimension and North Wireless Dimension are accused of misappropriating FTX customer funds.
Furthermore, the plaintiffs claim that Fenwick & West played a role in aiding FTX’s alleged fraud by failing to intervene in a series of misrepresentations to customers. The class suit argues an implicit agreement existed among FTX US, other affiliates, and Fenwick & West to deceive customers, appealing to the law firm due to potential financial gain.
The legal action identifies individuals from FTX’s internal circle, including Sam Bankman-Fried, Caroline Ellison, Gary Wang, and Nishad Singh.
This is not Fenwick & West’s first encounter with legal action involving FTX. In February, a similar class-action lawsuit was filed, alleging the law firm’s involvement in establishing FTX’s business and Bankman-Fried’s fraudulent activities. Sequoia Capital, an investor in FTX, was also implicated.
Recently, Fenwick & West engaged peer firm Gibson Dunn to manage legal matters related to its alleged role at FTX, as reported by Reuters on June 21. FTX collapsed and filed for bankruptcy in November 2022 due to its inability to process customer withdrawals. Sam Bankman-Fried, under house arrest, faces charges including wire fraud, conspiracy, and money laundering. He is scheduled for criminal trials in October and March.
On August 8th, prosecutors announced their intention to reinstate a charge related to illegal campaign finance, previously dropped due to potential conflicts with a treaty obligation with the Bahamas.
