Why Are FTX Victims Suing Fenwick & West?
A group of 20 FTX victims from five countries or jurisdictions has filed a $525 million lawsuit against Fenwick & West LLP, accusing the Silicon Valley law firm of helping conceal the fraud that led to the exchange’s collapse.
The complaint, filed Wednesday in the US District Court for the District of Columbia, names Fenwick alongside six individual defendants. The plaintiffs say they lost their life savings when FTX failed and allege that Fenwick’s work gave the exchange a false appearance of legitimacy.
The lawsuit argues that Fenwick did more than provide legal services. It claims the firm helped create corporate and operational structures that allowed customer funds to be misused while limiting outside scrutiny.
What Role Does Nishad Singh’s Testimony Play?
The case centers in part on 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.
According to the complaint, Singh said he personally told Fenwick attorneys that customer funds were being misused. The plaintiffs allege that instead of stepping away, the firm advised on ways to conceal the conduct.
The lawsuit also claims Fenwick attorneys created North Dimension Inc., a Delaware shell company presented as an electronics retailer, which allegedly routed more than $3 billion in stolen customer funds.
Fenwick is also accused of helping implement FTX’s Signal auto-delete messaging policy, which federal prosecutors said helped the fraud avoid detection by regulators and investigators.
Investor Takeaway
What Did the Bankruptcy Examiner Find?
The complaint cites a 2024 report from a court-appointed bankruptcy examiner who reviewed more than 200,000 documents. According to the lawsuit, the examiner found that Fenwick created corporate structures for FTX and Alameda Research, formed shell entities used to obscure money movements, and drafted backdated agreements tied to illicit transfers.
The lawsuit says the examiner concluded Fenwick was “deeply intertwined in nearly every aspect of FTX Group’s wrongdoing.”
“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.
The plaintiffs also allege that after FTX filed for bankruptcy in November 2022, Fenwick removed references to the exchange from its website and hired defense lawyers from Gibson Dunn before any civil lawsuit had been filed against it.
Investor Takeaway
What Damages Are the Plaintiffs Seeking?
The plaintiffs are bringing seven claims against Fenwick, including malpractice, fraud, and gross negligence. They are seeking more than $525 million in compensatory damages, the return of all legal fees Fenwick earned from FTX, and punitive damages against partners Tyler Newby and Daniel Friedberg.
The lawsuit comes as Bankman-Fried continues to lose ground in post-trial challenges. Last month, Judge Lewis Kaplan denied his request for a new trial, rejecting claims tied to new evidence and potential testimony from former FTX executives.
Kaplan, who sentenced Bankman-Fried to 25 years in prison in 2024, said the arguments were without merit and described claims about Singh’s testimony as “wildly conspiratorial and entirely contradicted by the record.”
