FTX Investors Target Fenwick & West for Alleged Role in Exchange Fraud

Investors in the failed cryptocurrency exchange FTX have filed a new complaint against Silicon Valley law firm Fenwick & West, alleging the firm played an integral role in the multibillion-dollar fraud orchestrated by FTX founder Sam Bankman-Fried. The lawsuit, lodged on Monday in a Florida federal court as part of a wider multidistrict action, seeks to hold the firm liable under U.S. racketeering statutes for knowingly facilitating the misuse of customer assets. Plaintiffs say Fenwick & West "designed, approved and implemented" corporate structures—including the shell company North Dimension—that allowed Bankman-Fried and other insiders to divert hundreds of millions of dollars in customer deposits through sham loans and other transactions. They argue the firm’s prestige helped FTX raise more than $1.3 billion from investors and deflect regulatory scrutiny prior to the exchange’s November 2022 collapse. Although 130 professional service providers are named in the broader litigation, Fenwick & West is the only one accused of possessing actual knowledge of the fraud and providing substantial assistance. Testimony cited from former FTX executives, as well as findings by the FTX bankruptcy’s independent examiner, describe the firm as “deeply intertwined” in FTX Group’s operations, advising on encrypted-messaging policies and funding structures that masked the alleged wrongdoing. The case marks one of the most aggressive efforts to extend liability for a corporate client’s misconduct to its outside counsel. Fenwick & West has not publicly commented on the new filing. Bankman-Fried was convicted last year on seven fraud counts and is serving a 25-year sentence while pursuing an appeal.