FTX’s former external legal team disputes involvement in fraud allegations

Coinmama
FTX’s former external legal team disputes involvement in fraud allegations
Blockonomics


A law firm that previously provided services to the now-defunct cryptocurrency exchange FTX has refuted a class-action lawsuit brought against it, claiming that it assisted in the exchange’s alleged fraudulent activities.

According to a Sept. 21 court filing, United States-based law firm Fenwick & West denies all accusations of misconduct related to the provision of legal services during FTX operations:

“It is black-letter law that an attorney cannot be held liable for conspiracy or aiding and abetting a client’s wrong “‘as long as [his] conduct falls within the scope of the representation of the client.’”

Filing in the U.S. District Court for the Southern District of Florida. Source: Thomson Reuters

The plaintiffs contend that while Fenwick provided regular legal services within the bounds of the law, Sam Bankman-Fried allegedly misused the advice to advance his fraudulent activities.

They further argued that Fenwick exceeded the norm in its service offerings to FTX.

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The plaintiffs allege that Fenwick can be held liable because it purportedly “provided services to the FTX Group entities that went well beyond those a law firm should and usually does provide,” the filing states.

Related: Crypto’s Lehman moment: Investors buy $250M of FTX claims — Report

It further claims that employees of Fenwick chose to depart from the firm and join FTX voluntarily.

Additionally, the filing reiterated that Fenwick assisted in establishing corporations used by Bankman-Fried in his fraud and advised FTX on regulatory compliance in the evolving crypto landscape.

However, Fenwick argued it should not bear liability as it was not the sole law firm representing FTX. It asserts that it played a relatively minor role in providing various aspects of legal advice to the bankrupt exchange.

“If Plaintiffs’ allegations were sufficient to state a claim against Fenwick for conspiracy and aiding and-abetting liability, then any lawyer could be hauled into court and forced to answer for his client’s misconduct. That is not the law.“

This comes after FTX debtors filed a lawsuit against former employees of the Hong Kong-incorporated company Salameda, which was previously affiliated with the FTX group.

FTX initiated legal action to reclaim $157.3 million, alleging that the funds were illicitly withdrawn shortly before the exchange’s bankruptcy filing.

Magazine: Deposit risk: What do crypto exchanges really do with your money?



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