Report: FTX Client Sues Law Firm for Aiding SBF in Alleged Fraud

In assisting FTX with its alleged fraud, Fenwick & West acted “well beyond what a law firm should, and often does,” in assisting FTX with its alleged fraud, the complaint alleges.

A group of clients of once-famous cryptocurrency exchange FTX has reportedly filed a lawsuit against the law firm Fenwick & West, insisting that the law firm was involved in an elaborate fraud by Sam Bankman-Fried (SBF) that resulted in subsequent billions of dollars in losses.

The former leader of the exchange has pleaded not guilty to the fraud charges against him. He is currently living with his family, awaiting a trial in early October that will determine whether he played a role in one of the biggest collapses in cryptocurrency history.

Second attack of its kind on law firm Fenwick & West

The lawsuit, filed in the Northern District of California, accuses the law firm of circumventing regulatory rules and setting up SBF and other entities hired by former FTX executives to commit fraud, Reuters recently reported.

Specifically, these organizations help cryptocurrency companies misappropriate users’ funds and use them for speculative investments or political and charitable donations.

The group of investors described law firm Fenwick & West as FTX’s main outside law firm and insisted that its lawyers had in-depth knowledge of the exchange’s “intricate organizational structure, severe lack of internal controls, and questionable business practices.”

Subsequently, the law firm Fenwick & West allegedly enabled the market to obtain certain regulatory licenses in the US without having to apply directly to the regulator.

An interesting fact is that Daniel Friedberg (former head attorney of cryptocurrency exchange FTX) previously worked for the accused law firm. Certain reports earlier this year suggested that while he was at the helm of the exchange, he cooperated with U.S. prosecutors to learn more about SBF’s conduct.

Case unraveled a year after the disaster

The FTX crash triggered $8 billion in customer losses and is considered one of the darkest events in the history of the cryptocurrency industry. As a result, the trial of former CEO Sam Bankman-Fried was highly anticipated not only by distressed investors, but also by society at large.

Multiple authorities and regulators named SBF as the culprit in the crash and insisted on the maximum prison sentence. Some reports said the 31-year-old could face 115 to 155 years in prison if all charges are proven.

He, on the other hand, pleaded not guilty to any crimes and was allowed to live in his parents’ home on a whopping $250 million bond. A big trial against him is scheduled for Oct. 2, and some of his former colleagues may appear to accuse him.

An example is his ex-girlfriend and ex-leader of Alameda Research, Caroline Ellison. Not long ago, in an interview with the media, he shared excerpts from her private diary. According to leaked information, Ellison was going through serious problems in the months leading up to the infamous collapse.

The Justice Department insisted that SBF should go to jail because his actions could intimidate the women who are expected to take part in the lawsuit in October.