Customers of the bankrupt crypto exchange FTX are seeking to amend their lawsuit against Fenwick & West, a law firm that was once contracted by the company. They claim that new information has emerged, showing that Fenwick played a central role in FTX’s collapse.
The criminal trial of former FTX CEO Sam Bankman-Fried and investigations in the exchange’s bankruptcy proceedings have revealed specific evidence implicating Fenwick in the fraudulent activities that led to FTX’s downfall. Customers allege that Fenwick provided substantial assistance in creating structures that allowed for various frauds to take place.
According to the customers, Fenwick agreed to create, manage, and represent conflicted companies, such as FTX’s sister trading firm Alameda Research and its subsidiary North Dimension, which lacked safeguards to prevent the theft of billions of dollars. Prosecutors have previously described FTX’s fraud as one of the largest in US history.
The lawsuit against Fenwick is part of a larger class-action lawsuit filed by FTX users after the exchange collapsed in late 2022. The lawsuit includes claims against the exchange, celebrities accused of promoting FTX, and other companies alleged to have been involved with FTX.
Fenwick has denied the allegations and moved to dismiss previous complaints filed against them in August 2023. They have not yet provided a comment on the recent developments.
The proposed amended complaint highlights new information that emerged during Bankman-Fried’s criminal trial, including testimony from FTX insiders who revealed Fenwick’s involvement in the misuse of customer funds and other fraudulent activities. The group claims to have learned additional details about Fenwick’s relationship with FTX from interviews with settled FTX insiders.
The filing also references an independent examiner appointed by the bankruptcy court handling FTX’s proceedings, who reportedly found that Fenwick was deeply intertwined in FTX’s wrongdoing. The examiner’s report allegedly revealed that Fenwick had close relationships with FTX’s executive team and facilitated transactions that misused customer assets.
Additionally, the proposed complaint includes two new state law claims against Fenwick, accusing the firm of violating securities laws in Florida and California in relation to FTX Token (FTT) and other FTX-controlled instruments. The group alleges that Fenwick played an active role in designing and promoting these securities.
Overall, the customers are seeking to hold Fenwick accountable for their alleged role in FTX’s collapse and fraudulent activities. The lawsuit continues to unfold as more details emerge about the extent of Fenwick’s involvement.