FTX’s former primary counsel Fenwick & West LLP has been hit with a class action suit claiming it aided the crypto exchange’s alleged multi-billion dollar fraud.
An Aug. 7 filing by a group of FTX customers in a California District Court alleged the law firm set up several “shadowy entities” allowing FTX co-founder Sam Bankman-Fried and other executives to adopt “creative but illegal strategies” to perpetuate fraud.
The suit claims Fenwick & West provided services to FTX that “went well beyond those a law firm should and usually does provide” such as structuring acquisitions by FTX US in ways that circumvented regulatory scrutiny and supplying staff to execute strategies the law firm proposed.
The “shadowy entities” were named as North Dimension and North Wireless Dimension which the suit alleged siphoned misappropriated FTX customer funds.
The plaintiffs said Fenwick & West aided and abetted FTX’s alleged fraud by choosing not to intervene in a series of misrepresentations supposedly made by FTX to its customers.
There was an implied agreement between FTX US, other FTX affiliates and Fenwick & West to deceive customers, the class suit said — something which appealed to the law firm because it “stood to gain financially” from FTX’s alleged misconduct, it added.
Bankman-Fried, former Alameda Research CEO Caroline Ellison, former FTX co-founder Gary Wang and former FTX engineering lead Nishad Singh were the four so-called FTX insiders listed by the plaintiffs.
Fenwick & West was named in a similar class suit in February that also alleged it assisted Bankman-Fried and FTX in setting up its business.
The February class action — which also targeted FTX investor and venture capital firm Sequoia Capital — claimed the services provided by Fenwick & West were central to Bankman-Fried’s fraud.
The law firm recently hired peer firm Gibson Dunn to assist with legal matters related to its alleged role at FTX according to a June 21 Reuters report.
Related: Prosecutors will still consider Sam Bankman-Fried’s alleged campaign finance scheme at trial
FTX collapsed and filed for bankruptcy in November 2022 when it was unable to process a large volume of customerwithdrawals.
Bankman Fried remains under house arrest and faces 12 charges including wire fraud, conspiracy and money laundering. He is set to have two criminal trials in October and March.
Prosecutors said on Aug. 8 that they plan to re-add a charge relating to illegal campaign finance which was previously dropped due it potentially violating a treaty obligation with The Bahamas.
Cointelegraph contacted Fenwick & West for comment but did not immediately receive a response.
Magazine: Deposit risk: What do crypto exchanges really do with your money?