Victims of the FTX fraud case are updating their lawsuit. New evidence shows Fenwick and West – a law firm – have equally orchestrated the fraud.
According to testimonies given by FTX Insiders, Fenwick and West were not merely legal representatives but they also created and approved the structures that led to mismanagement of customer funds.
The customers have accused the firm for misrepresenting FTX and its sister firm Almaeda Research and its subsidiary North Dimension.
This lawsuit is a component of a larger multi-district class-action lawsuit initiated by FTX users following the exchange’s collapse in late 2022.
The broader legal action targets various entities, including the exchange itself, celebrities who promoted FTX, and several companies accused of collaborating with the firm.
Fenwick and West moved to deny these allegations in August, 2023.
New Information Surfaces on FTX Case
The new complaint has tied FTX’s case directly to its legal representative Fenwick and West. According to the file, the firm already knew how the exchange aimed at misappropriating the users funds. The amended complaint cites testimony from key FTX insiders who pleaded guilty and testified against Bankman-Fried: co-founder Zixiao “Gary” Wang, former Alameda CEO Caroline Ellison, and former FTX engineering director Nishad Singh.
“At SBF’s criminal trial, FTX Insider and co-founder Nishad Singh testified that he informed Fenwick of the misuse of customer funds, improper loans, and false representations, and that Fenwick advised on how to facilitate and hide these very acts,”
As per the filing.
According to the filing, an independent examiner was appointed in the FTX case who reviewed over 200,000 internal documents and came to the conclusion that the law firm is indeed involved in the fraud.
The filing highlights specific findings from the examiner’s report:
- Close relationships: Fenwick reportedly had “exceptionally close relationships” with FTX’s executive team.
- Conflicted transactions: The firm allegedly “facilitated conflicted intercompany transactions that misused customer assets.”
- Obscuring assets: Fenwick is accused of creating shell companies “to obscure asset movements” and implementing auto-deleting messages on the encrypted app Signal for communication among FTX executives.
The customer who filed the complaint also claimed that the law firm implemented concealment practices that prosecutors and regulators called obstruction.
Fenwick And West In Soup: Hit With Two Securities Claims
New allegations have been brought against the law firm Fenwick, accusing it of securities violations in Florida and California.
The claims allege that Fenwick played a significant role in creating, promoting, and selling FTX Token (FTT), as well as other financial products.
The plaintiffs argue that these products were unregistered securities. Fenwick, however, has maintained that it shouldn’t be held responsible for a client’s actions as long as its conduct was within the scope of its legal representation.
Another law firm, Sullivan & Cromwell, was also initially sued for allegedly helping FTX. However, the claims against them were dropped due to insufficient evidence.