FTX victims filed a $525 million lawsuit against Fenwick & West, accusing the law firm of helping conceal the crypto exchange fraud.
A group of 20 victims linked to the collapse of FTX has filed a $525 million lawsuit against Fenwick & West LLP. The plaintiffs allege that the law firm aided in concealing the fraud behind the failed crypto exchange.
The suit was filed in the U.S. District Court for the District of Columbia. The complaint states that the victims were from 5 countries or jurisdictions. They say they lost their life savings when the exchange failed in 2022.
Victims Claim Law Firm Helped Conceal FTX Fraud
According to the lawsuit, Fenwick & West was FTX’s primary outside legal counsel. Plaintiffs say the firm facilitated the use of shell companies and the misuse of customer funds. This led users to think that the exchange was legal and safe.
The complaint also alleges that the law firm contributed to a “false sense of legitimacy” for FTX. So, many customers opted not to remove their cash before the collapse. Victims now argue that the fraud could not have reached such a large scale without outside support.
The case also lists 6 individual defendants related to the legal work. They are charged with failing to fulfill their fiduciary responsibilities and concealing financial wrongdoing. But the defendants have not yet made a public response to the latest allegations.
Reading more: Missed Billions: FTX Assets Could Have Reached $114B Today | Live Bitcoin News
The lawsuit received extra publicity due to Nishad Singh’s testimony. Singh had earlier pleaded guilty to fraud charges in relation to the collapse of the exchange. He also gave evidence in the criminal trial of FTX leaders.
Singh had earlier told the court about the misuse of the customer’s money, his testimony said. But plaintiffs allege the firm didn’t desist from working with the company. Rather, the lawsuit claims that legal tactics were employed to cover up the issues.
Wider Legal Pressure Continues After FTX Collapse
The lawsuit is part of a larger campaign to make advisers and partners accountable. There are multiple lawsuits related to FTX that are still pending in the United States. Other law firms and financial advisers are also under legal pressure over the exchange.
Reports earlier this year indicated Fenwick & West was in talks for a proposed settlement. More details will be available later in a Florida federal court. But the ongoing lawsuit is still demanding hundreds of millions of dollars in damages from the firm.
FTX’s collapse is one of the biggest crypto scandals. The exchange failed, leaving millions of customers around the world without access to their funds. As a result, courts and regulators are still investigating the part played by advisers and executives.
Previously, Sam Bankman-Fried was sentenced to 25 years in prison for fraud crimes. A previous motion for a new trial was also denied by Judge Lewis Kaplan. The court ruled that the proposed witnesses were not newly discovered evidence.
The recent lawsuit has brought accountability in the crypto industry to the forefront once again. Backers say that professional advisers should be held accountable for their role in covering up misconduct. Meanwhile, critics warn that the case could create wider legal risks for firms serving crypto companies in the future.
