FTX users have reached a proposed settlement with Fenwick and West over fraud charges
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Collapsed crypto exchange FTX and Silicon Valley law firm Fenwick & West have reached a proposed settlement to sue users for allegedly helping to facilitate the fraud that preceded FTX's collapse.
Key Takeaways:
FTX Users and Fenwick & West have settled lawsuits related to the exchange's collapse.
The terms of the deal, which were not disclosed, will be submitted to the court for approval on February 27.
The case is part of a broader effort by consumers to hold advisers and affiliates accountable after the FTX collapse.
In a joint filing filed Friday in Florida federal court, Fenwick and attorneys representing FTX users said they plan to formally file the approval with the court on Feb. 27.
The filing did not disclose financial terms, but both sides asked the court to stay all pending deadlines and motions when the settlement is finalized.
FTX Collect has sparked a wave of lawsuits from users
The case is part of a wider wave of litigation following the sudden collapse of FTX in November 2022, in which millions of customers were unable to access their funds.
Users have filed claims against former executives, business partners, advertisers and professional service providers related to the Exchange.
The lawsuit against Fenwick was originally filed in 2023 and was later amended in August.
The organization played a “key and critical role” in enabling the FTX fraud, Fenwick said, by designing and approving corporate structures that allowed misconduct to go undetected.
According to the complaint, Fenwick advised FTX on structuring its operations in ways that avoided certain money transmitter registration requirements.
The lawsuit also alleges the company had visibility into the commingling of client funds and blurred operational boundaries between FTX and its sister business, Alameda Research.
Fenwick has consistently denied the allegations. The company has previously tried to deny the case, saying that it has no knowledge of any fraud and that it provides regular and legitimate legal services to the client.
In November, however, the court rejected Fenwick's request, allowing the consumers' amended complaint to proceed.
The proposed settlement comes after various lawsuits filed by consumers to hold outside consultants accountable.
In the year In February 2024, FTX users accused Sullivan & Cromwell, the exchange's former chief outside counsel, of playing a role in a multibillion-dollar fraud.
That case was dismissed eight months later, citing prosecutors' lack of evidence.
Sam Bankman-fried claims FTX never paid.
As reported, Bankman-Fried reignited the debate over FTX's failure, arguing that the exchange always had enough assets to pay customers in full.
In the year In a September 30 document, the former CEO argued that the $8 billion deficit mentioned during the bankruptcy was “never abandoned,” and that up to 143% of the customer recovery FTX suffered financial loss – not bankruptcy.
“There have always been enough assets to pay all customers—in full, in kind—both in November 2022 and today,” he wrote.
Bankman-Fried framed the collapse as a “classic bank run,” with panicked outflows draining liquidity within days.
FTX and Alameda properties until 2018. He said he is out of debt by mid-2022 and that financing deals are in the works ahead of the bankruptcy filing.
His document disputes earlier reports of the bankruptcy group and blames management for eroding prices and extending creditor payments.
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