Fenwick & West LLP, the principal law firm that advised former cryptocurrency exchange FTX, agreed on Friday to pay $54 million to settle a 2023 class action lawsuit, filed by former customers of the defunct exchange.
The plaintiffs allege that Fenwick “facilitated FTX’s fraud” by playing “a key and crucial role in the most important aspects of why and how the FTX fraud was accomplished,” according to the original complaint.
Plaintiffs argue that the Silicon Valley law firm helped the now-bankrupt FTX obscure the misuse of customer funds by creating legal entities, structures and other strategies to hide the commingling of funds, including transfers between the exchange and its trading arm, Alameda Research.
Court filing excerpt from $54 million settlement Fenwick & West LLP has agreed to pay. Source: PACER
These strategies also included advising FTX on creating legal structures that would alleviate the exchange from having to acquire money transmitter licenses.
Fenwick initially sought to have the lawsuit dismissed before agreeing to settle with the plaintiffs in February. However, the settlement must still be approved by a US judge.
The settlement marks the latest development in the legal fallout from the 2022 collapse of the FTX exchange, which sent shockwaves through the crypto industry at the time and exposed the sector to greater scrutiny from US regulators and lawmakers.
Related: Law firm Fenwick & West sued for $525M over alleged role in FTX collapse
FTX estate pays former customers and creditors at steep discount
In March, the FTX Recovery Trust, which oversees the distribution of assets to former creditors and customers of the exchange, distributed $2.2 billion to the damaged parties.
The next tranche of reimbursements is scheduled for May 29.
However, customers and former creditors of the exchange say the Trust has mismanaged the liquidation of assets, often selling the recovered assets at a steep discount or below all-time high values reached that were reached following the collapse of FTX.
Source: SpaceX
The Recovery Trust sold a 5% stake in AI company Cursor for about $200,000 in April 2023, missing out on windfall profits when the value of that 5% stake ballooned to about $3 billion in April 2026.
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