Fenwick & West LLP, the lead law firm that advised former cryptocurrency exchange FTX, agreed Friday to pay $54 million to settle a 2023 class action lawsuit filed by former clients of the now-defunct exchange.
The plaintiffs allege that Fenwick “facilitated the FTX fraud” by playing a “key and central role in critical aspects explaining why and how the FTX fraud occurred,” according to the original complaint.
The plaintiffs allege that the Silicon Valley law firm helped now-bankrupt FTX cover up its misuse of client funds by creating legal entities, structures and other strategies to conceal the mixing of funds, including transfers between the exchange and its trading arm, Alameda Research.
Court Excerpt from $54 Million Settlement Fenwick & West LLP agreed to pay. Source: PACER
These strategies also included advising FTX on creating legal structures that would relieve the exchange of the need to purchase money transfer licenses.
Fenwick initially sought to have the lawsuit dismissed before agreeing to a settlement with the plaintiffs in February. However, the settlement still needs to be approved by a US judge.
The settlement is the latest development in the legal fallout from the 2022 collapse of the FTX exchange, which sent shockwaves through the cryptocurrency industry at the time and exposed the sector to greater scrutiny from U.S. regulators and lawmakers.
Related: Law firm Fenwick & West sued for $525 million over alleged role in FTX collapse
FTX Estate pays former clients and creditors at a significant discount
In March, the FTX Recovery Trust, which oversees the distribution of assets to former creditors and clients of the exchange, distributed $2.2 billion to injured parties.
The next tranche of refunds is scheduled for May 29.
But customers and former creditors of the exchange say the Trust mismanaged asset liquidations, often selling recovered assets at a significant discount or below the all-time highs achieved after FTX’s collapse.
Source: SpaceX
Recovery Trust sold a 5% stake in artificial intelligence company Cursor for about $200,000 in April 2023, missing out on windfall gains when the value of that 5% stake rose to about $3 billion in April 2026.
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