Lawsuit Accuses Former FTX Law Firm Of Establishing Shadowy Entities

The lawsuit alleged that “FTX and former top executives utilized shadowy entities” created by Fenwick & West to steal money from customers.

A class action lawsuit has been filed against Fenwick & West LLP, the former general counsel for FTX, alleging that they helped the crypto exchange commit an alleged multi-billion dollar scam.

In a lawsuit filed on August 7 in a California district court, a group of FTX clients claimed that the law company created many “shadowy entities” that allowed Sam Bankman-Fried, the co-founder of FTX, and other executives to use “creative but illegal strategies” to commit fraud.

According to the lawsuit, Fenwick & West offered FTX services that “went well beyond those a law firm should and typically does provide,” such as structuring FTX US acquisitions to avoid regulatory scrutiny and providing personnel to carry out the plans the law firm recommended.

North Dimension and North Wireless Dimension were identified as the “shadowy entities” the lawsuit claimed siphoned off and stole FTX customer monies.

By opting not to take action about several alleged misrepresentations by FTX to its clients, the plaintiffs claimed that Fenwick & West encouraged and assisted FTX’s purported fraud.

According to the class action lawsuit, there was an implied agreement between Fenwick & West, FTX US, and other FTX affiliates to deceive customers. This was appealing to the law firm because it “stood to gain financially” from FTX’s alleged misbehavior, it claimed.

The four so-called FTX insiders named by the plaintiffs were Bankman-Fried, former Alameda Research CEO Caroline Ellison, former FTX co-founder Gary Wang, and former FTX engineering head Nishad Singh.

In February, Fenwick & West was listed in a similar class action lawsuit claiming that it helped Bankman-Fried and FTX establish their businesses.

The February class action claimed that Fenwick & West’s services were essential to Bankman-Fried’s fraud, targeting FTX investor and venture capital company Sequoia Capital.

According to a June 21 Reuters article, the law firm recently recruited rival firm Gibson Dunn to help with legal concerns linked to its alleged participation at FTX.

In November 2022, FTX failed and declared bankruptcy as it could not handle many customer withdrawals.

Bankman Fried is still under house arrest and is accused of 12 offenses, including conspiracy, money laundering, and wire fraud. Two criminal trials are scheduled for him in October and March.