Customers of the bankrupt cryptocurrency exchange FTX are seeking to update their lawsuit against Fenwick & West, claiming new information shows that the law firm was a significant factor in FTX's collapse.
The criminal trial of former FTX CEO Sam Bankman-Fried and its bankruptcy investigation revealed Fenwick's important role in the FTX fraud, with FTX customers stating in a court filing that they hope to amend their lawsuit.
FTX customers accuse Fenwick of providing 'substantial assistance' in designing and approving a structure that allowed multiple fraudulent activities.
They accuse the law firm of agreeing to create, manage, and represent FTX's affiliates, such as Alameda Research and its subsidiary North Dimension, while deliberately failing to establish any protective measures to prevent the theft of funds.
This lawsuit is part of a multi-district class action filed by FTX customers after the collapse of FTX at the end of 2022, targeting relevant celebrities and multiple companies that collaborated with FTX.
Fenwick denied the allegations in a previous complaint and requested dismissal. Fenwick & West did not immediately respond to media requests for comment.
Bankman-Fried's trial reveals new information
The amended complaint alleges that Bankman-Fried's criminal trial revealed details of how Fenwick assisted FTX. The co-founder of FTX pleaded guilty and provided testimony against Bankman-Fried, with the jury finding him guilty of seven counts related to fraud and money laundering.
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The complaint also accuses the law firm of violating securities laws in Florida and California related to FTX's cryptocurrency FTT.
In its response in September 2023, Fenwick argued that it should not be held liable for assisting the client's wrongdoing as long as its actions were within the scope of client representation.
