FTX’s one-time law firm denies awareness of fraud, moves to dismiss lawsuit FTX’s one-time law firm denies awareness of fraud, moves to dismiss lawsuit
Fenwick & West said it only provided routine services to SBF's crypto exchange.
2 min read
Updated: Sep. 23, 2023 at 11:42 pm UTC
Cover art/illustration via CryptoSlate. Image includes combined content which may include AI-generated content.
A law firm that once provided services to FTX defended itself and attempted to dismiss a class action suit through a legal filing on Sept. 22.
The relevant lawsuit began in August. There, customers attempted to argue that Fenwick & West was in part liable for alleged fraudulent activity at FTX.
In its current filing, Fenwick defended itself on various grounds. It argued that plaintiffs failed to allege that Fenwick acted outside of the scope of representation.
Furthermore, Fenwick said that plaintiffs failed to show that Fenwick knew about or directly assisted FTX’s fraud, and failed to show that or that Fenwick participated in a Racketeer Influenced and Corrupt Organizations (RICO) enterprise.
Each of those points is essential to customers’ legal claims. Accordingly, Fenwick aims to have the class action suit dismissed through its latest legal filing.
Latest filing discusses finer points
Fenwick also addressed other points. The law firm noted that plaintiffs did not argue that it “orchestrated” FTX’s fraud. Instead, plaintiffs repeatedly affirmed in their claim that former FTX CEO Sam Bankman-Fried was responsible for that fraud.
Fenwick asserted that it represented only FTX, not Bankman-Fried or any other company insider. It went on to note that it was just one of many law firms that represented FTX and otherwise described its services as “routine” throughout its filing.
The law firm also responded to allegations that it provided certain services that went “well beyond” the services that law firms typically provide. Fenwick said that those controversial services involved employing lawyers who freely left Fenwick to join FTX, creating companies through which Bankman-Fried later committed fraud, and advising FTX on regulatory compliance as related to cryptocurrency trading.
Fenwick noted that the plaintiffs do not claim that those services were wrong or legally actionable in their own right. Instead, it said that the plaintiffs argued that Fenwick is liable because it provided legal services while it knew of FTX’s fraud.
Fenwick added that plaintiffs based certain arguments on inferences about the law firm’s monitoring and diligence policies, combined with the fact that two Fenwick employees — Daniel Friedberg and Can Sun — left the law firm to work with FTX. To that end, customers in their original lawsuit drew attention to a 2021 email in which Friedberg acknowledged cash-sharing between FTX and its sister firm Alameda Research.
As with various other points, Fenwick denied that the existence of this email plausibly shows that it was aware of alleged wrongdoing at FTX.
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Mike Dalton
Before transitioning to crypto writing in 2018, Mike studied library and information sciences. Currently, he resides on Canada's West Coast.
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FTX
FTX is a defunct cryptocurrency exchange, currently in bankruptcy proceedings, that was founded by Sam Bankman-Fried and Zixiao “Gary” Wang in May 2019.
Alameda Research
Alameda Research was once a principal trading firm, operating as an arm of the failed crypto exchange, FTX.
Sam Bankman-Fried is the former CEO, and co-founder of defunct crypto exchange FTX and Alameda Research.