2023-8-9 11:33 |
A new class action lawsuit makes severe allegations that high-profile Silicon Valley law firm Fenwick & West actively helped conceal and enable fraud by the collapsed cryptocurrency exchange FTX and its founder Sam Bankman-Fried.
Filed in federal court on Aug. 7, the suit claims Fenwick had an “exceedingly close” relationship as legal counsel to FTX and provided services that allowed FTX to grow exponentially while aware of improper activities.
The complaint bluntly states,
“Fenwick provided services to the FTX Group entities that went well beyond those a law firm should and usually does provide… and the services and strategies it provided to the FTX Group were similarly central to the FTX Group’s fraud.”
The close ties are evidenced by two former Fenwick lawyers joining FTX in critical legal and compliance roles. According to the suit, Fenwick helped establish shell companies that were allegedly used to divert billions in customer funds to Alameda Research, Bankman-Fried’s trading firm.
Despite glaring red flags, the law firm also allegedly advised FTX on creatively structuring transactions to dodge regulatory scrutiny.
The sweeping 70-page class action complaint accuses Fenwick of actively aiding fraud and misusing up to $10 billion in customer funds.
As reported in the filing,
“Fenwick helped set up the shadowy entities through which Bankman-Fried and the FTX Insiders operated a fraud.”
The suit also cites Bankman-Fried’s damning admission to journalists that FTX’s public commitment to compliance was merely “just PR.”
According to the complaint, Fenwick provided extensive legal services that enabled FTX to grow explosively amid mounting issues with missing customer money and egregious conflicts of interest.
As stated, Fenwick even “helped FTX US to develop ‘compliance’ procedures designed to skirt FTX’s regulatory obligations and conceal its noncompliance.” The lawsuit claims Fenwick is jointly liable for the massive losses when FTX shockingly collapsed in Nov. 2022.
As of press time, Fenwick has yet to respond to CryptoSlate’s request for comment. The case will likely hinge on evidence of what exactly Fenwick knew about FTX’s activities and when.
For now, it presents another major blow to the crumbling FTX empire, which federal prosecutors are investigating as an unprecedented criminal fraud.
The post FTX lawfirm hit with class action over alleged role in FTX cover up appeared first on CryptoSlate.
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