The law firm Fenwick & West has filed a motion to dismiss allegations that it played a role in the fraud committed by its client, the cryptocurrency exchange FTX. The motion, filed by lawyers from Gibson, Dunn & Crutcher, marks Fenwick’s first public defense against claims that it helped FTX conceal millions in stolen customer funds.
In a motion, the law firm argues that its services were “routine” legal work and should not be construed as aiding and abetting FTX’s alleged fraudulent activities.
The scope of Fenwick’s involvement
The motion outlines three key areas where Fenwick provided legal services to FTX: hiring lawyers who later joined FTX, forming corporations used by FTX co-founder Sam Bankman-Fried, and advising on regulatory compliance. Moreover, the motion vehemently denies the plaintiff’s claim that the law firm should be held liable for Bankman-Fried’s alleged misuse of these legal services.
In the motion, they said, “A lawyer’s representation of a client and knowledge of their employees does not make them omniscient as to the client’s inner workings.”
Fenwick has a long history of representing esteemed Silicon Valley companies like Apple, Oracle, and Facebook. Now, the firm finds itself in the crosshairs, accused of causing damages due to the collapse of FTX, one of its clients.
The larger context: Third parties under scrutiny
Fenwick & West is not the only entity facing legal repercussions in the wake of FTX’s November 2022 collapse. Accounting firms, celebrity endorsers, and even high-profile marketers employed by FTX are also under scrutiny. Several of these celebrities, including Tom Brady and Stephen Curry, have filed separate motions to dismiss litigation against them. These motions claim that the plaintiffs have not provided any factual evidence to support their allegations.
In addition to Fenwick’s legal team, the motion was co-authored by three attorneys from the Florida law firm Gunster, Yoakley & Stewart. This adds another layer of complexity to the case, which is part of multidistrict litigation in the US District Court for the Southern District of Florida. Multiple groups of FTX customers are seeking to hold Fenwick liable for its involvement with the crypto exchange.
The case also has implications for Fenwick’s former employees who later joined FTX. Daniel Friedberg, once the chair of Fenwick’s payments practice, became FTX’s chief regulatory officer. Can Sun, a former Fenwick associate, served as its general counsel. Both are implicated in the allegations that Fenwick knew about FTX’s breach of fiduciary duties and helped conceal customer funds.
Federal prosecutors have also shown interest in Fenwick this year. A March court filing revealed that the firm received federal law enforcement subpoenas. Sam Bankman-Fried sought these subpoenaed documents for his October criminal trial, but a New York federal judge denied his request. The Justice Department stated that these documents did not relate to his criminal case, without providing further details.
