A class-action lawsuit has been filed against Fenwick & West LLP, FTX’s former primary legal counsel, asserting that the law firm played a role in the alleged multi-billion dollar fraud associated with the crypto exchange.
A filing on August 7th, submitted by a group of FTX clients in a California District Court, alleges that Fenwick & West established a series of undisclosed entities, enabling FTX co-founder Sam Bankman-Fried and other executives to employ “innovative yet illicit tactics” to perpetrate fraudulent activities.
According to the lawsuit, Fenwick & West provided FTX with services that extended beyond the typical scope of a legal firm, including devising methods for FTX US to acquire assets that evaded regulatory scrutiny and deploying personnel to execute strategies proposed by the law firm.
The lawsuit points to two specific entities, North Dimension and North Wireless Dimension, referred to as “shadowy entities,” which, as per the allegations, funneled misappropriated FTX customer funds.
The plaintiffs contended that Fenwick & West actively contributed to and supported the purported fraud carried out by FTX by opting not to intervene in a sequence of misrepresented actions directed towards FTX customers.
The class-action lawsuit posited that an implicit understanding existed among FTX US, other affiliated entities of FTX, and Fenwick & West to engage in customer deception. This arrangement was appealing to the law firm due to its potential financial gains resulting from FTX’s alleged misconduct, as stated in the suit.
The plaintiffs identified four individuals as FTX insiders: Bankman-Fried, Caroline Ellison, the former CEO of Alameda Research, Gary Wang, former co-founder of FTX, and Nishad Singh, former FTX engineering lead.
Fenwick & West had been previously implicated in a similar class-action lawsuit in February, which alleged the firm’s involvement in aiding Bankman-Fried and FTX in establishing their operations.
This February lawsuit, which also targeted FTX investor Sequoia Capital, asserted that the services rendered by Fenwick & West were pivotal to Bankman-Fried’s fraudulent activities.
Recent reports from June 21 by Reuters stated that Fenwick & West had engaged the services of peer law firm Gibson Dunn to assist in addressing legal concerns linked to its alleged role in the FTX situation.
In November 2022, FTX experienced a collapse and initiated bankruptcy proceedings due to its inability to manage a substantial influx of customer withdrawal requests.
Bankman-Fried, who continues to be confined to his residence, is confronted with a dozen charges, encompassing wire fraud, conspiracy, and money laundering. He is scheduled to undergo two separate criminal trials in October and March.
On August 8th, prosecutors announced their intention to reinstate a charge related to illicit campaign finance. This charge had previously been dropped due to potential conflict with a treaty obligation with the Bahamas.
Cointelegraph reached out to Fenwick & West for a statement, but an immediate response was not received.