Fenwick & West allegedly set up shell companies for the company, leading to a class-action suit
Fenwick & West LLP, former primary counsel for FTX, will be facing a class-action suit that claims the firm assisted the crypto exchange’s alleged multibillion-dollar fraud scheme. A group of FTX customers filed the suit in a California District Court on August 7, alleging the law firm established various “shadowy entities” permitting FTX co-founder Sam Bankman-Fried and other company executives to develop “creative but illegal strategies” to commit fraud.
The suit alleges that Fenwick & West delivered services to FTX that “went well beyond those a law firm should and usually does provide,” such as avoiding regulatory scrutiny with creative structuring of FTX US acquisitions and providing staff to execute those proposed strategies.
The “shadowy entities” named in the suit are North Dimension and North Wireless Dimension, which allegedly siphoned the misappropriated customer funds. The plaintiffs claim that Fenwick & West aided and abetted FTX’s fraud by deciding not to interfere with a series of misrepresentations allegedly made to customers by FTX.
According to the suit, the implied agreement between Fenwick & West, FTX US, and other FTX affiliates to deceive customers was something the law firm was attracted to because it “stood to gain financially” from the company’s alleged misconduct.
Former Alameda Research CEO Caroline Ellison, FTX co-founder Gary Wang, and former FTX engineering head Nishad Singh were named in the complaint along with Bankman-Fried as the four supposed FTX insiders.
According to a report from Reuters on June 21, Fenwick & West hired the services of law firm Gibson Dunn to aid with legal issues related to its alleged part in the FTX scheme. Bankman-Fried is facing 12 felony charges, including conspiracy, wire fraud, and money laundering. He remains under house arrest and is awaiting two criminal trials in October and March.