Law Firm Denies Involvement in Alleged Fraudulent Activities of FTX Cryptocurrency Exchange
Law firm Fenwick & West has denied allegations of aiding and abetting fraudulent activities brought against it in a class-action lawsuit related to its provision of legal services to the cryptocurrency exchange FTX. The firm, which had previously worked with FTX before its closure, refuted all accusations of misconduct and claimed that it acted within the scope of its representation of the exchange.
The court filing, made on September 21 in the U.S. District Court for the Southern District of Florida, cited legal principles stating that attorneys cannot be held liable for their client’s wrongdoings as long as their actions fall within the bounds of their representation. Fenwick & West drew on this principle to defend itself against the allegations made by the plaintiffs.
The plaintiffs in the case argue that while Fenwick & West provided regular legal services and acted within the law, FTX’s founder, Sam Bankman-Fried, allegedly misused the advice provided by the firm to advance his fraudulent activities. They further claimed that the law firm went beyond its usual service offerings by providing additional support to FTX.
The filing highlighted that the alleged misconduct occurred when employees of Fenwick & West chose to join FTX voluntarily, which the plaintiffs argue implicates the law firm in the fraud. Furthermore, the plaintiffs claimed that Fenwick & West assisted Bankman-Fried in establishing corporations used for fraudulent purposes and provided advisory services on regulatory compliance in the cryptocurrency industry.
However, Fenwick & West contended that it should not be held liable as it was not the only law firm representing FTX. The firm asserted that it played a relatively minor role in providing various aspects of legal advice to the now-defunct exchange.
The lawsuit against Fenwick & West follows a separate legal action taken by FTX debtors against former employees of Salameda, a company previously affiliated with the FTX group. FTX initiated the lawsuit in an attempt to reclaim $157.3 million that it alleges was illicitly withdrawn shortly before the exchange filed for bankruptcy.
As the legal battle continues, the case shines a spotlight on the responsibility and liability of law firms in cases involving fraudulent activities of cryptocurrency exchanges. With the ever-evolving crypto landscape, the actions and involvement of legal professionals in such cases are being closely scrutinized.