The FTX Crypto Exchange FTX customers seek to update their trials against Fenwick & West, one of the law firms formerly contracted by the company, saying that new information shows that it was at the heart of the FTX collapse.
The criminal trial of the former CEO of the FTX, Sam Bankman, and surveys in the bankruptcy procedure “produced specific evidence that Fenwick played a key and crucial role in the most important aspects of the reason why and the way FTX fraud was accomplished,” wrote the FTX customers to modify their action on Monday.
“In simple terms, FTX fraud was only possible because Fenwick provided” substantial assistance “by creating and approving the structures that allowed many frauds,” said the group.
They accused the law firm of having agreed to create, manage and represent “clearly conflicting companies” such as FTX’s sister trading company, Alameda Research and its subsidiary North Dimension, “which deliberately had no guarantee to prevent the billions of dollars which were certainly stolen”.
FTX fraud has been described by prosecutors as one of the greatest in American history.
The file is part of monitoring of massive multi-discreet appeal filed by FTX users after its collapse at the end of 2022 which brought claims against the scholarship, celebrities accused of promoting FTX and several companies that would have worked with the company, among others.
Fenwick denied and moved to reject the allegations in a previous complaint filed in August 2023. Fenwick & West did not immediately return the request for comments from Cointelegraph.
The trial of Bankman Fried Unarths of new information, indicates the complaint
The modified complaint proposed said that Bankman Fried’s criminal trial last year had discovered new information on how Fenwick had helped FTX.
The co-founder of the FTX, Zixiao, “Gary” Wang, the former CEO of Alameda, Caroline Ellison and the ex-director of FTX engineering, Nishad Singh, pleaded guilty and testified against Bankman Freed, a jury guilty of seven counts concerning fraud and money laundering.
“During the SBF criminal trial, the initiate and co-founder of the FTX Nishad Singh said he had informed Fenwick of the abusive use of customer funds, inappropriate loans and false representations, and that Fenwick advised to facilitate and hide these very acts,” said the file.
The group said in a separate file that he “learned much more details on Fenwick’s relationship with FTX, on the basis of cooperation of the interviews of the FTX regulated initiates.”
The bankruptcy court concludes that Fenwick “deeply intertwined” with FTX, said customers
The file said that an independent examiner appointed by the court managing the FTX bankruptcy procedure “examined more than 200,000 internal documents (many of which were directly linked to Fenwick) and concluded that Fenwick was specifically linked in almost all aspects of the FTX group’s reprehensible acts.”
According to the group, the examiner found that Fenwick had “exceptionally narrow relations” with the FTX management team and “facilitated intersocated conflict transactions that have misused customer assets”.
They also declared that the examiner had accused Fenwick of having created companies “to obscure asset movements” and was at the origin of the implementation of automatic deletion messages sent between FTX frames via the encrypted messaging signal.
In relation: The founder of Binance, Changpeng Zhao, requests a rejection of a FTX trial of $ 1.8 billion
The group accused Fenwick of also having implemented “other concealment practices that regulators and prosecutors later quoted as obstruction” and said that the law firm “knew that these actions would induce investors and regulators”.
Fenwick struck with two new titles complaints
The proposed complaint adds two new state law complaints, accusing Fenwick of having violated the securities laws in Florida and California on the cryptocurrency of the exchange, FTX Token (FTT).
The group has accused the law firm of playing “an active role in the design, promotion and facilitation of the sale” of the return accounts offered by FTX and “interest in other instruments controlled by the FTX”, which, according to them, were not registered securities.
Fenwick argued in its request for rejection of the previous complaint filed in September 2023 that it cannot be held responsible for having helped the harm of a customer as long as “its conduct is the field of application of the representation of the customer”.
The group had also continued Sullivan & Cromwell, another law firm that FTX had contracted, accusing him of helping the exchange, but they then abandoned the complaint due to a lack of proof of their complaints.
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