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Former FTX Law Firm Denies Role in Collapse; Challenges Allegations as ‘Fatally Deficient’ in Court Motion  Skip to main content

Former FTX Law Firm Denies Role in Collapse; Challenges Allegations as ‘Fatally Deficient’ in Court Motion 

Former FTX Law Firm Denies Role in Collapse; Challenges Allegations as 'Fatally Deficient' in Court Motion 

San Francisco-based law firm Fenwick & West LLP is denying allegations from FTX founder Sam Bankman-Fried that the firm provided legal advice enabling the alleged fraud that led to the cryptocurrency exchange’s collapse. In a recent court filing, Fenwick & West asserts the allegations are “fatally deficient” and should be dismissed with prejudice.

Law Firm Challenges FTX Founder’s Claims

In a motion to dismiss filed Wednesday in Florida federal court, Fenwick & West argues the complaint fails to state viable claims for conspiracy, aiding and abetting fraud, negligence, or racketeering. The firm asserts the allegations improperly seek to hold it liable based on providing routine legal services to FTX within the scope of representation. Fenwick & West claims the complaint does not show it acted outside its role as legal counsel, an essential element for the asserted causes of action against a law firm.

“A lawyer’s representation of a client and knowledge of their employees does not make them omniscient as to the client’s inner workings,” the motion insists.

Additionally, Fenwick & West contends the complaint lacks plausible allegations the firm had actual knowledge of the alleged fraud by FTX founder Sam Bankman-Fried and other insiders. The firm states the claims fail to specify the purported misconduct with sufficient particularity, as required for fraud-based cases under court procedural rules. Fenwick & West further argue that the complaint does not establish the firm substantially assisted the alleged fraud or proximately caused claimed damages.

“Each of these claims against Fenwick is fatally deficient, and the Complaint should be dismissed in its entirety,” Fenwick & West wrote.

The law firm asserts the complaint is deficient in pleading a claim under the Racketeer Influenced and Corrupt Organizations Act, lacking allegations Fenwick & West agreed to participate in a criminal enterprise or that such an enterprise even existed. Fenwick & West maintain the alleged enterprise comprises only FTX and employees acting within their roles, which recent precedent indicates cannot sustain a RICO claim.

In contrast, attorneys for Bankman-Fried claimed in a separate filing he was assured his actions complied with the law, based on legal advice. The lawyers said Bankman-Fried understood lawyers had reviewed and approved FTX policies, refuting accusations he intended to defraud.

What do you think about Fenwick & West’s court motion? Share your thoughts and opinions about this subject in the comments section below.

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