FTX customers accuse Fenwick & West of central role in fraud

FTX customers have filed an amended complaint against Silicon Valley law firm Fenwick & West, alleging it played a key role in the crypto exchange’s fraud before its 2022 collapse.

The filing is part of a multi-district litigation (MDL) and follows a June 2023 complaint claiming the firm aided and abetted Sam Bankman-Fried’s alleged fraud, negligence, fiduciary breach, and misappropriation of customer funds.

Fenwick denied the allegations in September 2023, seeking dismissal of all claims with prejudice on grounds the plaintiffs failed to state a valid claim.

Plaintiffs argue the amended complaint is strengthened by evidence gathered from multiple investigations over the past two and a half years.

This marks the first substantive amendment to the “FTX Law Firm Track” within the MDL, now proceeding solely against Fenwick & West.

The revised complaint seeks court approval to add new facts and render Fenwick’s motion to dismiss moot.

Out of 130 law firms that worked with FTX, only Fenwick is named, after the FTX Independent Examiner found it was involved in “nearly every aspect” of the exchange’s wrongdoing.

Plaintiffs claim Fenwick had actual knowledge of the fraud and provided substantial assistance, violating federal racketeering laws and promoting unregistered securities in breach of Florida and California statutes.

The firm allegedly created and managed corporate structures, including Alameda Research, FTX, and North Dimension, without safeguards to prevent large-scale fund misappropriation.

Evidence from Bankman-Fried’s trial purportedly shows FTX insiders relied on Fenwick’s reputation to gain credibility, attract billions in venture capital, and placate regulators.

The plaintiffs contend Fenwick’s actions either amounted to professional negligence causing billions in losses or made it a “key and crucial” participant in the fraud.