FTX's Former Law Firm Defends Itself, Seeks Lawsuit Dismissal
A legal battle involving cryptocurrency exchange FTX and its former law firm, Fenwick & West, has taken a new turn as the law firm has defended itself and sought the dismissal of a class-action lawsuit. The lawsuit, initiated by customers in August, aimed to hold Fenwick & West partly responsible for alleged fraudulent activities at FTX.
In its recent legal filing, Fenwick & West mounted a defense on multiple fronts. First, the law firm argued that the plaintiffs had not provided sufficient evidence to show that Fenwick had acted outside the scope of its representation for FTX.
Furthermore, Fenwick contended that the plaintiffs had failed to demonstrate that the law firm had knowledge of or directly assisted in FTX's fraudulent activities. Additionally, the plaintiffs did not establish that Fenwick had participated in a Racketeer Influenced and Corrupt Organizations (RICO) enterprise, a crucial element of their legal claims. Fenwick's goal with this legal filing is to have the class-action lawsuit against them dismissed.
Fenwick & West addressed several other key points in their filing. They emphasized that the plaintiffs did not allege that the law firm had orchestrated FTX's fraud. Instead, the plaintiffs consistently attributed the responsibility for the fraud to former FTX CEO Sam Bankman-Fried.
The law firm clarified that its representation was exclusively for FTX, not Bankman-Fried or any other individuals within the company. Fenwick also pointed out that it was just one of several law firms representing FTX, characterizing its services as routine.
Fenwick & West also responded to allegations that it had provided services beyond the typical scope of legal representation. While acknowledging that certain services involved lawyers who later joined FTX, Fenwick stated that the plaintiffs did not assert that these services were inherently wrong or legally actionable. Instead, the plaintiffs argued that Fenwick was liable because it continued to provide legal services while being aware of FTX's alleged fraud.
The law firm further disputed the plaintiffs' claims based on inferences about its monitoring and diligence policies, along with the fact that two of its former employees joined FTX. The plaintiffs had drawn attention to a 2021 email in which one of Fenwick's former employees acknowledged financial sharing between FTX and its sister company, Alameda Research.
Fenwick & West firmly denied that the existence of this email provided plausible evidence of their awareness of wrongdoing at FTX. As the legal battle unfolds, it remains to be seen how the court will ultimately adjudicate these complex claims and counterclaims.