FTX Clients Sue Fenwick & West for Crypto Fraud Role
FTX customers filed an amended complaint in the Southern District of Florida as part of a multi-district lawsuit against law firm Fenwick & West over its alleged key role in the crypto exchange’s collapse and multi-billion-dollar fraud. The plaintiffs accuse the firm of exceeding normal legal services, structuring conflicted entities like Alameda Research and FTX, and facilitating unregistered securities and racketeering. The complaint cites evidence from Sam Bankman-Fried’s trial to allege Fenwick had actual knowledge of fraudulent schemes and provided substantial assistance. Customers seek to amend their complaint, deny Fenwick’s motion to dismiss, and establish the firm’s legal liability for fiduciary breaches and professional negligence.
Bearish
This lawsuit heightens legal and regulatory risks around FTX and its advisors. Accusations that Fenwick & West played a central role in the exchange’s fraud may further erode investor confidence. In the short term, traders could react to increased uncertainty with sell-offs. Historically, major legal allegations—such as the SEC’s case against Ripple—have triggered market dips. Over the longer term, however, clearer liability could lead to improved compliance standards, but immediate sentiment remains negative.