FTX victims sue Fenwick & West for $525 million, alleging law firm helped build fraud infrastructure

Twenty FTX victims from five countries have filed a $525 million lawsuit against Silicon Valley law firm Fenwick & West, alleging the firm helped establish shell companies, implement auto-deleting communications systems and structure entities that allowed the fraud to continue while customers kept depositing funds.

The lawsuit, filed in the US District Court for the District of Columbia, was brought by 20 FTX victims from five different countries and jurisdictions. The plaintiffs claim the law firm did far more than provide legal representation to FTX. According to the complaint, Fenwick & West allegedly helped structure entities, communication systems and legal arrangements that allowed the fraud to continue while customers continued depositing funds into the exchange.

The case marks one of the most aggressive civil actions yet brought by FTX victims against professional service providers connected to the failed crypto empire once led by Sam Bankman-Fried.

The lawsuit centers heavily on testimony from former FTX engineering director Nishad Singh, who previously pleaded guilty to fraud charges and cooperated with federal prosecutors during Bankman-Fried’s criminal trial.

According to the complaint, Singh told Fenwick attorneys directly that customer funds were being improperly used. Rather than distancing themselves from the exchange, the plaintiffs allege the law firm advised on methods that concealed the misuse of funds.

The allegations have become a focal point for FTX victims seeking accountability beyond FTX executives themselves.

Court filings claim Fenwick attorneys established North Dimension Inc., a Delaware-based shell company that allegedly posed as an electronics retailer while secretly processing billions of dollars connected to FTX customer deposits.

The lawsuit alleges more than $3 billion in customer funds passed through the entity.

FTX victims also accuse the law firm of helping implement internal Signal messaging systems with auto-delete functions, a communication setup prosecutors previously argued complicated oversight and investigations into the exchange’s operations.

“These findings are those of a court-appointed officer based on documentary evidence in federal bankruptcy proceedings,” the complaint states.

Bankruptcy examiner findings add pressure

The claims from FTX victims draw additional weight from findings made by court-appointed bankruptcy examiner Robert Cleary, whose 2024 report reviewed more than 200,000 documents tied to the exchange’s collapse.

According to the lawsuit, the examiner concluded that Fenwick & West was “deeply intertwined in nearly every aspect of FTX Group’s wrongdoing.”

The report allegedly found that the law firm helped create corporate structures for both FTX and Alameda Research, drafted agreements related to fund transfers and established shell entities allegedly used to obscure financial movements.

FTX victims argue those services helped create a false sense of legitimacy around the exchange at a time when billions of dollars in customer assets were allegedly being misused.

The plaintiffs also claim Fenwick removed references to FTX from its website shortly after the exchange collapsed into bankruptcy in November 2022. Additionally, the lawsuit alleges the firm retained high-profile defense lawyers from Gibson Dunn before civil actions against the firm were formally filed.

Plaintiffs seek damages and return of legal fees

The lawsuit contains seven separate legal claims, including malpractice, fraud and gross negligence. FTX victims are seeking compensatory damages exceeding $525 million, repayment of all legal fees earned by Fenwick from FTX-related work and punitive damages against individual partners Tyler Newby and Daniel Friedberg.

The complaint accuses certain defendants of “deliberate and reckless professional conduct” tied to the operation of the exchange. Legal analysts say the case could become an important test of how much liability outside advisers may face following major crypto failures.

“The issue now is whether service providers crossed the line from advisers into active enablers,” said former federal prosecutor Renato Mariotti in prior commentary surrounding professional liability cases in crypto collapses. For FTX victims, the lawsuit represents another attempt to recover funds lost during the exchange’s implosion.

Sam Bankman-Fried remains at center of fallout

The legal pressure surrounding the collapse continues even after Bankman-Fried’s criminal conviction. Last month, US District Judge Lewis Kaplan rejected Bankman-Fried’s request for a new trial, dismissing arguments that prosecutors withheld evidence or pressured witnesses.

Kaplan, who sentenced the former FTX CEO to 25 years in prison in 2024, described several defense arguments as “wildly conspiratorial and entirely contradicted by the record.”

Bankman-Fried had argued that former FTX executives Ryan Salame and Daniel Chapsky could challenge claims surrounding the exchange’s insolvency. He also alleged Nishad Singh altered testimony under prosecutorial pressure. The court rejected those arguments outright.

The continued legal fallout shows how deeply the FTX collapse still affects the broader crypto industry nearly four years after the exchange entered bankruptcy.

FTX victims continue global recovery efforts

For many FTX victims, the lawsuit against Fenwick & West reflects broader frustration about the network of firms, advisers and executives connected to the exchange before its collapse.

Although bankruptcy administrators have recovered billions of dollars in assets, many former users continue facing uncertainty regarding full repayment timelines.

The FTX bankruptcy remains one of the largest corporate failures in crypto history, with investigators estimating billions of dollars in customer funds were improperly handled.

As more lawsuits emerge, FTX victims are increasingly targeting not only former executives but also outside institutions accused of enabling or overlooking misconduct.

The outcome of the Fenwick case could shape future expectations for law firms, auditors and consultants working with major crypto companies.

For now, the lawsuit adds another explosive chapter to the continuing legal reckoning surrounding FTX and signals that FTX victims are far from finished pursuing accountability.