Disgruntled customers of the now-defunct crypto exchange FTX have sought to amend their lawsuit against Fenwick & West, the exchange’s former legal advisor, citing new evidence that implicates the firm in FTX’s collapse.
In an amended filing submitted to the court on August 11, the customers contend that information revealed during Sam Bankman-Fried’s criminal trial and FTX’s bankruptcy proceedings demonstrates Fenwick’s deep involvement in “the most important aspects of why and how the FTX fraud was carried out.”
They assert that the exchange’s downfall was not solely due to internal wrongdoing but also the result of the legal frameworks created and approved by Fenwick.
What are the allegations in the amended lawsuit?
The amended lawsuit alleges that Fenwick & West provided “substantial assistance” to FTX by designing and approving corporate structures that enabled billions of dollars in customer funds to be misappropriated.
The plaintiffs accuse Fenwick of representing conflicted FTX-related entities—such as trading firm Alameda Research and its subsidiary North Dimension—that deliberately lacked safeguards to prevent asset misuse, a key factor in FTX’s collapse.
According to the filing, former FTX executives Nishad Singh, Gary Wang, and Caroline Ellison testified that Fenwick was aware of improper loans, false statements, and the misuse of customer funds, and even advised on methods to conceal these actions. Singh reportedly told the court that he informed Fenwick about these activities, and in response, the firm advised on how to facilitate and hide them.
The filing also includes findings from an independent examiner in the FTX bankruptcy who reviewed over 200,000 documents, many involving Fenwick. The examiner concluded that Fenwick had “exceptionally close relationships” with FTX leadership and was “deeply intertwined” in most of the wrongdoing. The law firm is accused of creating shell companies to obscure asset transfers and setting up auto-deleting Signal chats used by FTX executives.
Plaintiffs further allege that Fenwick implemented concealment tactics later identified by regulators and prosecutors as obstruction and knowingly engaged in actions that misled investors and regulators.
Additionally, the filing introduces two new claims under Florida and California securities laws, accusing Fenwick of playing an active role in designing, promoting, and facilitating the sale of unregistered securities, including YBAs, FTT tokens, and other FTX-controlled instruments to Florida residents.
Fenwick & West in Previous Proceedings
Fenwick & West’s connections to FTX have come up repeatedly during Sam Bankman-Fried’s trial in late 2023. The former CEO testified that the firm, along with FTX’s in-house legal team, managed key legal tasks such as payment agent agreements for Alameda’s North Dimension bank accounts—accounts through which FTX customer deposits were routed.
Bankman-Fried also told the court that Fenwick lawyers were aware that FTX insiders used encrypted, auto-deleting chat apps, and that he heavily relied on their legal guidance as well as advice from other counsel.
In a motion to dismiss filed in September 2023, Fenwick argued that it cannot be held responsible for a client’s misconduct when its work remained within the scope of legal representation, denying all allegations in the original lawsuit.
