Fenwick & West LLP, the head law firm advising former cryptocurrency exchange FTX, has agreed to pay $54 million (roughly Rs. 514 crore) to settle a 2023 class action lawsuit filed by former users of the crypto exchange. The Silicon Valley law firm is accused of assisting the now-bankrupt FTX to hide the misuse of customer funds by using legal entities, structures, and other tricks to hide the consolidation of funds, including transfers between the exchange and its trading arm, Alameda Research. Strategies also included advising FTX on the establishment of legal structures that would relieve the exchange from the need to obtain money transmitter licenses.
Legal Fallout From Collapse of FTX Crypto Exchange Continues
The plaintiffs accused Fenwick of facilitating FTX’s fraud, as they were playing a key and crucial role in the most important aspects of why and how the FTX fraud was accomplished, as per the original complaint. Fenwick first fought to have the lawsuit dismissed, but agreed to settle with the plaintiffs in February. The settlement will need to be approved by a judge, and it is the latest development in the legal battle following the collapse of the FTX exchange in 2022, which had sent shockwaves through the crypto industry at the time and exposed the sector to greater scrutiny from US regulators and lawmakers.
In March, the FTX Recovery Trust distributed $2.2 billion (roughly Rs. 20,953 crore) to the damaged parties. The core responsibility of this trust is to handle the distribution of assets to former creditors and customers of the exchange. The next instalment of reimbursements is scheduled for May 29. However, customers and former creditors of the exchange have alleged that the trust has mishandled the liquidation of assets. Following the collapse of FTX, the recovered assets were sold at a steep discount or below all-time high values that were reached at the time.
Earlier this month, Fenwick & West LLP was accused of helping conceal the FTX fraud. The $525 million (roughly Rs. 5,000 crore) lawsuit was filed by a group of 20 victims from five countries or jurisdictions. The complaint was filed in the US District Court for the District of Columbia, naming the firm alongside six individual defendants. The complainants claimed that they lost their savings when FTX imploded, and that Fenwick’s involvement gave the exchange a false sense of legitimacy and assurance, due to which they did not pull their funds out until it was too late.
Earlier this year, former FTX CEO and co-founder Sam Bankman-Fried’s plea for a new trial was also declined since the witnesses cited were not newly discovered. The former FTX CEO’s trial was overseen by Judge Lewis Kaplan in 2023, who wrote in an order on Tuesday that the claim of new evidence and witnesses was baseless. Moreover, the motion was reportedly filed without consulting his lawyers, while an appeals court was considering his conviction and sentence.
Cryptocurrency is an unregulated digital currency, not a legal tender and subject to market risks. The information provided in the article is not intended to be and does not constitute financial advice, trading advice or any other advice or recommendation of any sort offered or endorsed by NDTV. NDTV shall not be responsible for any loss arising from any investment based on any perceived recommendation, forecast or any other information contained in the article.
