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A group of customers from the cryptocurrency exchange FTX has filed a lawsuit against the well-known law firm Fenwick & West, alleging that the firm played a role in facilitating fraud through its legal guidance to the now-bankrupt exchange. Founded by Sam Bankman-Fried, the cryptocurrency exchange FTX has been at the center of controversy and legal proceedings. This lawsuit marks the second legal action targeting Fenwick with regard to its involvement with FTX.
The lawsuit in the Northern District of California claims that Fenwick’s legal services to FTX extended far beyond conventional advisory roles. It is alleged that Fenwick was instrumental in devising strategies to evade regulatory oversight, involving the arrangement of transactions aimed at circumventing regulatory scrutiny. Moreover, the complaint contends that Fenwick assisted in establishing entities that FTX executives, including Bankman-Fried, allegedly used to perpetrate fraudulent activities.
Fenwick’s purported actions have raised concerns about its commitment to ethical and legal standards. A Fenwick spokesperson has not responded to requests for comment regarding the lawsuit.
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The plaintiffs in this proposed class action lawsuit intend to seek a transfer of the case to the Southern District of Florida, where various lawsuits relating to the FTX exchange’s collapse have been consolidated for unified legal proceedings under a single judge. This strategic move aims to streamline the legal process and consolidate similar claims against the exchange and its affiliates.
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The lawsuit portrays Fenwick as a key external legal partner for FTX, implying that its lawyers possessed unique insights into the inner workings of the exchange. This supposedly included knowledge of the exchange’s organizational intricacies, lack of internal controls, and questionable business practices. Notably, the complaint reveals that Daniel Friedberg, formerly a prominent regulatory lawyer for FTX, transitioned from Fenwick to the cryptocurrency exchange in 2020.
See also: Bankman-Fried Launches Defense as FTX’s Law Firm Faces Scrutiny
One of the more damning allegations in the lawsuit concerns the creation of entities with the alleged purpose of obscuring FTX executives’ use of customer funds. These funds were purportedly diverted to finance speculative investments and political and charitable contributions. Additionally, Fenwick‘s role in advising on transactions that facilitated FTX’s acquisition of specific regulatory licenses comes under scrutiny. The lawsuit suggests that these transactions allowed the exchange to bypass direct applications to U.S. regulators, potentially avoiding more stringent regulatory assessments.
It is worth noting that Sam Bankman-Fried, the founder of FTX, is currently facing multiple charges related to the alleged misappropriation of FTX customer funds. However, he has pleaded not guilty to these charges. Earlier this year, a judge rejected Bankman-Fried’s efforts to subpoena Fenwick for documentation in the context of the criminal case.
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