Former FTX Legal Advisors Move to Dismiss Lawsuit, Claiming No Knowledge of Fraud

In brief

Fenwick & West moves to dismiss lawsuit alleging the law firm aided FTX’s multi-billion dollar fraud, arguing it had no knowledge of wrongdoing.
Firm claims it only provided “routine and lawful legal services” despite bankruptcy examiner finding “exceptionally close relationships” with FTX leadership.
Lawyers argue plaintiffs are recycling allegations from a dismissed case against another FTX advisor, Sullivan & Cromwell, without proving fraud knowledge.

Former FTX legal advisors, Fenwick & West have moved to dismiss a lawsuit that alleges the firm played a key role in the mutli-billion dollar collapse of the exchange.

The firm wrote that after two years of litigation, the plaintiffs have yet to prove that Fenwick & West knew its client was committing fraud.

The lawsuit, filed in 2023, names many defendants who investors allege had knowledge of FTX’s fraud. It includes crypto exchange Binance, the Federal Deposit Insurance Corporation, super model Gisele Bundchen and her ex-husband and NFL star Tom Brady, the NBA’s Golden State Warriors, venture capital investor Kevin O’Leary, and tennis star Naomi Osaka.

Fenwick is adamant that it be left out of the fray. The firm did not immediately respond to a request for comment from Decrypt.

“Plaintiffs’ core theory is as facile as it is flawed,” the firm wrote. “Fenwick is not liable for aiding and abetting a fraud it knew nothing about, based solely on allegations that Fenwick did what law firms do every day—provide routine and lawful legal services to their clients.”

FTX went bust in 2022 after it became clear that the crypto exchange was using client funds, its own FTT exchange token, and Robinhood shares to prop up its sister firm, Alameda Research.

The past couple years have seen FTX founder and former CEO Sam Bankman-Fried sentenced to 25 years in prison, former Alameda Research CEO Caroline Ellison get a more lenient 2-year sentence as part of a plea deal, and billions repaid to the company’s creditors.

An independent FTX bankruptcy examiner reviewed hundreds of thousands of internal FTX documents, ultimately finding that Fenwick & West had “exceptionally close relationships” with FTX leadership and became “deeply intertwined” in the firm’s actions.

But the firm argued in its latest motion that the plaintiffs, a group of FTX investors, are making allegations “parroted from a report” on Sullivan & Cromwell, another law firm that advised FTX.

“But what Plaintiffs do not explain is that their allegations against Fenwick mirror those that they had earlier pursued quite aggressively against Sullivan & Cromwell, but then precipitously dismissed with prejudice,” Fenwick wrote.