Fenwick & West and FTX Customers Reach Settlement Agreement in Fraud Lawsuit
In a 2023 legal action, plaintiffs alleged the law firm served as an essential participant in the execution of FTX's fraudulent operations.
A proposed settlement has been reached between FTX customers and the law firm Fenwick & West regarding a lawsuit filed in 2023 that claimed the firm facilitated the fraudulent activities that resulted in the cryptocurrency platform's downfall more than three years ago.
In a joint court submission filed Friday with a Florida federal court, Fenwick along with legal representatives for FTX customers indicated their intention to present the proposed settlement agreement for judicial approval on Feb. 27.
While the joint filing did not reveal the particular terms and conditions of the settlement agreement, both sides requested that the court suspend all upcoming deadlines and any motions currently pending in the class-action litigation in anticipation of the settlement submission.
The legal action brought by FTX customers against Fenwick represents one component of a broader multidistrict class-action litigation initiated following FTX's collapse in late 2022. Customers have initiated legal proceedings against the cryptocurrency exchange itself, public figures who allegedly endorsed the platform, and numerous entities that maintained business relationships with the exchange.
The legal complaint, initially lodged in 2023 and subsequently amended in August, alleged that Fenwick performed "a key and crucial role in the most important aspects of why and how the FTX fraud was accomplished."
According to the customers' allegations, the fraudulent scheme at FTX "was only possible because Fenwick provided 'substantial assistance' by creating and approving the structures that allowed numerous frauds."
The litigation alleged that Fenwick provided counsel to FTX regarding how to organize its operations to circumvent money transmitter registration requirements and "had visibility into the commingling of funds and blurred boundaries" between FTX and Alameda Research.
In response, Fenwick moved to have the lawsuit dismissed, contending that it was "not liable for aiding and abetting a fraud it knew nothing about" and maintained that it delivered "routine and lawful legal services."
In November, the court permitted the amended complaint filed by FTX customers to move forward, rejecting Fenwick's dismissal motion.
Neither Fenwick & West nor the legal representatives for FTX customers, the Moskowitz Law Firm, provided immediate responses to requests for comment.
FTX customers had previously initiated legal action against Sullivan & Cromwell, which served as FTX's former external legal counsel, in February 2024, alleging the firm's involvement in FTX's multibillion-dollar fraudulent scheme, but chose to voluntarily withdraw the complaint eight months later due to insufficient evidence.