FTX Investors Sue Fenwick & West Over Alleged Role in $8 Billion Fraud

Fenwick & West, a prominent Silicon Valley law firm, is now facing a high-stakes lawsuit from FTX investors, who allege that the firm played an active role in the crypto exchange’s fraudulent activities. The amended class-action lawsuit, filed in the U.S. District Court for the Southern District of Florida, claims that Fenwick & West was not merely a legal advisor but helped design shell companies and opaque structures to conceal the misuse of customer funds. The legal action, which incorporates new evidence from the ongoing trial of FTX co-founder Sam Bankman-Fried, asserts that the firm’s involvement went beyond routine legal representation and contributed directly to the $8 billion collapse of the exchange [1].

Key to the case is the testimony of Nishad Singh, former FTX engineering director, who has cooperated with prosecutors and testified that he informed Fenwick & West of the misuse of customer funds, false financial disclosures, and improper loans. Singh alleges the firm advised on how to conceal these activities. Additionally, the bankruptcy examiner, who reviewed over 200,000 internal documents, concluded that Fenwick & West was “deeply intertwined” in nearly every aspect of the fraudulent operations [4]. The firm is also accused of assisting in the marketing of unregistered securities, such as the FTX Token (FTT), as part of a broader effort to mislead investors [5].

The lawsuit is unique in its application of RICO laws—typically used in organized crime cases—to the crypto space, seeking to hold Fenwick & West liable for alleged complicity in a fraudulent scheme. It is the only law firm among 130 entities linked to FTX that is being accused of knowing and actively assisting in the fraud [2]. The plaintiffs argue that Fenwick’s legal strategies helped legitimize FTX, enabling it to raise over $1.3 billion from investors despite insolvency risks [3].

Fenwick & West has denied the allegations, filing motions to dismiss the claims and arguing that law firms should not be held liable for a client’s misconduct unless their own actions exceeded the bounds of legal representation. The firm’s defense mirrors a previous unsuccessful attempt to sue another law firm, Sullivan & Cromwell, which was dropped due to insufficient evidence [7].

The legal battle has sparked broader discussions about professional liability in the crypto industry, particularly in the wake of the 2022 market collapse. Legal analysts have compared the case to the Enron scandal, where law firms faced similar scrutiny for enabling fraudulent schemes [8]. The outcome could set a precedent for how legal firms are held accountable in the fast-moving and often unregulated world of digital finance.

Despite the legal developments, the lawsuit has not triggered significant movements in crypto markets, with major assets like Bitcoin and Ethereum remaining relatively stable. Regulatory authorities have yet to issue specific enforcement actions related to the case, though the legal proceedings continue to evolve and are expected to have long-term implications for the legal and financial sectors.

Source:

[1] FTX Customers Seek to Update Lawsuit Against Fenwick & West Following New Evidence from Bankman-Fried’s Trial

(https://en.coinotag.com/ftx-customers-seek-to-update-lawsuit-against-fenwick-west-following-new-evidence-from-bankman-frieds-trial/)

[2] FTX Customers Amend Lawsuit Against Fenwick & West

(https://www.fxleaders.com/news/2025/08/12/ftx-customers-expand-lawsuit-against-fenwick-west-over-8-billion-collapse/)

[3] FTX Customers Sue Fenwick Over Role in Fraud and Securities Violations

(https://www.gate.com/post/status/12968062)

[4] FTX Users Bolster Lawsuit Claiming Law Firm Was 'Key' to Fraud

(https://www.todayonchain.com/news/article/01K2E4G0BBAMFP2TWETBNM6YXS)

[5] Focus Turns to Fenwick & West in the FTX Investor MDL

(https://www.law.com/americanlawyer/2025/08/11/focus-turns-to-fenwick--west-in-the-ftx-investor-mdl/)

[6] FTX Customers Amend Lawsuit Alleging Law Firm Enabled Fraud

(https://www.ainvest.com/news/ftx-customers-amend-lawsuit-alleging-law-firm-enabled-fraud-2508/)

[7] FTX Investors Target Fenwick & West as Sole Law Firm in MDL

(https://www.law.com/dailybusinessreview/2025/08/11/ftx-investors-target-fenwick--west-as-sole-law-firm-mdl-defendant/)

[8] FTX Investors Target Fenwick & West as Sole Law Firm in MDL

[9] This legal amendment hasn’t significantly impacted crypto markets, with no major fluctuations observed in crypto asset prices such as BTC and ETH. Regulatory bodies have yet to issue new enforcement actions related specifically to this lawsuit.

(https://coinmarketcap.com/community/articles/689b235021bc2a555c718831/)