FTX Victims Sue Law Firm Fenwick & West For $525M Over Alleged Role In Collapse

A group of 20 victims from five countries or jurisdictions has filed a $525 million lawsuit against Fenwick & West LLP, one of Silicon Valley’s top tech law firms, accusing it of helping conceal the FTX fraud.

The complaint, filed Wednesday in the US District Court for the District of Columbia, names the firm alongside six individual defendants. The plaintiffs say they lost their life savings when FTX collapsed, claiming that Fenwick’s involvement gave the exchange a false air of legitimacy that kept them from pulling their money out.

At the center of the case is testimony from Nishad Singh, FTX’s former director of engineering, who pleaded guilty to fraud charges and testified at Sam Bankman-Fried’s criminal trial. Singh said he personally told Fenwick attorneys that customer funds were being misused, and instead of walking away, the firm advised on how to hide it.

The complaint goes further. It says Fenwick attorneys set up North Dimension Inc., a Delaware shell company that posed as an electronics retailer but funneled over $3 billion in stolen customer funds. The firm also allegedly implemented FTX’s Signal auto-delete messaging policy, the same system federal prosecutors said helped the fraud go undetected by regulators and investigators.

Related: FTX estate misses out on $3B Cursor stake value after $200K sale in 2023

Examiner found Fenwick “intertwined” in FTX’s wrongdoing

A court-appointed bankruptcy examiner, whose report came out in 2024 after reviewing more than 200,000 documents, found that Fenwick created the corporate structures for both FTX and Alameda Research, formed shell entities to obscure money movements, and drafted backdated agreements to cover illicit transfers, the complaint states. The examiner concluded the firm was “deeply intertwined in nearly every aspect of FTX Group’s wrongdoing,” the lawsuit reads.

“These findings are those of a court-appointed officer based on documentary evidence in federal bankruptcy proceedings to which Fenwick was a party,” the lawsuit added.

FTX victims file lawsuit against Fenwick. Source: CourtListener

After FTX filed for bankruptcy in November 2022, Fenwick scrubbed all mentions of the exchange from its website. The firm also quietly hired top-tier law firm defense lawyers at Gibson Dunn before any civil lawsuit was filed against it, per the lawsuit.

The plaintiffs are bringing seven claims against Fenwick, including malpractice, fraud and gross negligence. They are seeking compensatory damages exceeding $525 million, return of all legal fees Fenwick earned from FTX and punitive damages against partners Tyler Newby and Daniel Friedberg for “deliberate and reckless individual professional conduct.”

Related: Sam Bankman-Fried withdraws motion for a new trial, still asks for new judge

Judge denies SBF’s bid for new trial

Last month, a federal judge denied Bankman-Fried’s bid for a new trial, calling his claims of new evidence baseless. Judge Lewis Kaplan, who sentenced the former FTX CEO to 25 years in prison in 2024, said Bankman-Fried’s argument that three former FTX executives could counter the government’s case was without merit, noting that he knew all three witnesses well before the trial.

Bankman-Fried had argued that Ryan Salame and Daniel Chapsky could challenge the government’s claims about FTX’s insolvency, and that Nishad Singh changed his testimony under pressure from prosecutors. Kaplan dismissed those claims as “wildly conspiratorial and entirely contradicted by the record.”

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