FTX Customers Allege Law Firm Fenwick & West Played ’Key Role’ in Fraud—Updated Lawsuit Reveals

Another day, another crypto scandal—but this one drags Silicon Valley's elite legal eagles into the mud.

FTX's burned customers just sharpened their knives. In a freshly updated lawsuit, they're pointing fingers at law firm Fenwick & West, accusing it of being the 'architect' of Sam Bankman-Fried's alleged fraud machine. Because nothing says 'legitimate' like needing your lawyers to allegedly help hide the bodies.

The suit claims Fenwick didn't just advise—it actively 'built the infrastructure' for FTX's shady dealings. From crafting loophole-riddled corporate structures to greenlighting questionable transactions, the firm allegedly played legal janitor—mopping up trails while SBF played billionaire boy genius.

And here's the kicker: Fenwick reportedly kept collecting fees even as FTX's house of cards trembled. Because in corporate law, the only thing stronger than attorney-client privilege is the billing department.

As regulators scramble to pretend they saw this coming, one thing's clear—when the crypto carnival collapses, the cleanup crew always includes some very expensive suits.

Legal Firms Face Mounting Scrutiny Over FTX Collapse Role

The lawsuit follows similar legal action against law firm Sullivan & Cromwell last year, which was accused of billing $8.5 million in fees while serving as primary counsel during the 16 months preceding FTX’s collapse.

Both firms face allegations of enabling Sam Bankman-Fried’s fraud scheme that commingled customer assets with Alameda Research’s trading operations.

The filing comes as FTX continues its distribution process, having returned $6.2 billion to creditors across two major payment rounds since February 2025.

However, the exchange now seeks to dispute claims from 49 restricted jurisdictions worth $800 million, with Chinese users accounting for 82% of the disputed value despite representing only 5% of allowed claims.

Fenwick Accused of Engineering Fraudulent Corporate Architecture

The complaint alleges Fenwick created “all of the corporate structures, company controls, and agreements for both Alameda and FTX” that the FTX Independent Examiner later deemed “complete failures of corporate control.“

The firm allegedly formed shell entities like North Dimension Inc. to funnel and conceal customer funds while drafting backdated agreements to justify illicit transfers retroactively.

Fenwick’s tax team allegedly drafted intercompany loan agreements and bonus payments enabling billions in transfers of misappropriated funds without oversight.

The firm allowed issuance of “founder loans” secured by customer funds while concurrently representing multiple conflicted entities, including SBF, Nishad Singh, Gary Wang, FTX, FTX US, North Dimension, and Alameda.

Partner Tyler Newby allegedly authored FTX’s encrypted communications policy, which explicitly allowed Signal’s disappearing messages, a feature prosecutors said helped enable the fraud.

Fenwick also advised FTX on avoiding money transmitter registrations by routing funds through shell entities.

The FTX Independent Examiner reviewed over 200,000 internal documents and found Fenwick had “” with FTX insiders while facilitating conflicted transactions.

Nishad Singh testified that he informed Fenwick of customer fund misuse and that the firm advised on facilitating and hiding these acts.

Fenwick allegedly promoted FTX’s reputation to gain credibility with customers and secure billions in venture capital investments.

Most surprisingly, the firm’s deletion of all FTX-related references from its website after the collapse allegedly is the most significant pointer to its awareness of its promotional role and exposure.

Recovery Process Faces Geographic and Legal Complications

FTX has distributed funds through two major rounds since beginning payouts in February 2025.

The first distribution totaled $1.2 billion for convenience class creditors with claims under $50,000, while the second reached $5 billion for larger claimants.

Dotcom Customer Entitlement Claims received 72% distributions, while US Customer Entitlement Claims received 54% payouts.

General Unsecured Claims and Digital Asset Loan Claims both received 61% distributions, with convenience claims receiving a full 120% reimbursement, including 9% annual interest.

Bankrupt crypto exchange @FTX_Official has announced that it will begin its next round of cash distributions to creditors on or around September 30.#FTX #Cryptohttps://t.co/fdavwXTbu7

The exchange announced its next distribution round will begin September 30, covering Class 5 Customer Entitlement Claims, Class 6 General Unsecured Claims, and newly approved Convenience Claims. The record date for eligible claimants is August 15.

Notably, as FTX continues the “fast-tracked” payout, Chinese creditor Weiwei Ji, representing over 300 users with $15 million in claims, opposes FTX’s proposal to restrict payouts in 49 jurisdictions.

Ji argues Chinese users should not be penalized due to regulatory assumptions, especially with legal pathways through Hong Kong.

Presumably as a result of this conflict, Backpack Exchange launched a non-profit claims marketplace enabling creditors to sell bankruptcy claims to third-party buyers rather than waiting for official distributions.

The platform offers complete processing without fees, addressing growing secondary market demand for immediate liquidity.

The arrested founder, Sam Bankman-Fried, remains imprisoned until December 2044 after receiving a 25-year sentence for fraud charges.

He was recently transferred to Federal Correctional Institution Terminal Island in Los Angeles, while accomplices Caroline Ellison and Ryan Salame have also received prison sentences.