Silicon Valley law firm Fenwick & West has agreed to a $54 million settlement with FTX customers, resolving allegations that the firm played a role in facilitating the cryptocurrency exchange’s alleged fraud. This agreement forms a significant part of a broader second wave of settlements in the FTX class action litigation, which also includes a $11.75 million payment from auditor Prager Metis and $420,000 from former NBA player Udonis Haslem, an FTX promoter.
Key Takeaways
- Fenwick & West, the primary external legal counsel for FTX US, will pay $54 million to settle claims that it aided Sam Bankman-Fried’s alleged fraud.
- The settlement is part of a larger second tranche of FTX class action settlements, also involving auditor Prager Metis and promoter Udonis Haslem.
- Fenwick & West has denied any wrongdoing, stating it was unaware of the fraud and stands by its legal work.
- The settlement is distinct from a separate $525 million lawsuit pending against Fenwick & West in Washington, D.C.
- Plaintiffs are seeking to replace the FTX bankruptcy estate with JND Legal Administration for managing settlement payouts to customers.
Customers’ legal representatives asserted that Fenwick & West “helped to craft and implement strategies that facilitated FTX’s fraud.” In response, Fenwick & West issued a statement to Reuters, asserting that it “was not aware of the fraud at FTX, stands by the integrity of its legal work, and disputes wrongdoing of any kind.” The firm’s settlement resolves claims within the federal court in Miami under U.S. District Judge K. Michael Moore.
This latest filing incorporates three additional defendants into the ongoing class action, following an initial round of settlements with 15 defendants that received preliminary court approval between December 2024 and July 2025. The first wave of settlements included Sam Bankman-Fried himself, former Alameda chief Caroline Ellison, ex-FTX engineering chief Nishad Singh, co-founder Gary Wang, former Fenwick partner Dan Friedberg (who later served as FTX’s chief compliance officer), and ten celebrity promoters.
The plaintiffs’ legal team, led by Adam Moskowitz and David Boies, is also requesting the court to certify a single class encompassing all individuals who held cryptocurrency or fiat on FTX, participated in yield-generating products, or purchased FTT, FTX’s native exchange token. The proposed class is described as potentially numbering in the “millions,” given FTX’s reported peak user base of over 1.2 million.
Furthermore, the plaintiffs are proposing to transfer the responsibility for administering settlement payouts from the FTX bankruptcy estate to JND Legal Administration. This change is proposed on grounds of cost efficiency, citing JND’s prior experience with a similar program for the Ripple Labs class settlement.
An allocation plan is being put forward to prevent double-dipping by claimants. This plan involves subtracting any recovery an individual has received through the FTX bankruptcy proceedings from their total losses. The value of lost crypto is calculated using CoinGecko prices from May 14, while FTT is valued only at its documented purchase price. Any FTT received without cost is considered to have zero value in this calculation.
However, not all claimants are in agreement. A group of 18 individuals and three corporate entities from various international jurisdictions, collectively claiming over $500 million in losses, are pursuing their own separate lawsuit. They have requested that the court refrain from entering any orders that would encompass their claims until a ruling is made on a motion they previously filed.
It is important to note that Fenwick & West continues to face a separate $525 million civil suit in Washington, D.C. This suit, brought by 20 FTX victims, names the firm, several current and former Fenwick attorneys, and other defendants, including Tyler Newby and Dan Friedberg. The claims in this separate litigation include malpractice, fraud, and gross negligence.
The settlement with Fenwick & West contrasts with a previous class action brought by the same plaintiffs’ legal team against Sullivan & Cromwell, FTX’s bankruptcy counsel. That suit was voluntarily withdrawn in October 2024 after a court-appointed examiner concluded that Sullivan & Cromwell was not complicit in the FTX fraud.
The FTX collapse occurred in November 2022. Sam Bankman-Fried is currently serving a 25-year prison sentence following his conviction for misappropriating approximately $8 billion from customers; he is appealing his conviction. The FTX bankruptcy estate has reported returning over $5 billion to creditors and has committed to compensating most customers on a dollar-for-dollar basis.
Potential Regulatory Precedent
The settlement involving Fenwick & West underscores a growing trend in the cryptocurrency industry where professional service providers, including law firms and auditors, are being held accountable for their alleged roles in facilitating or failing to prevent fraudulent activities. This case could establish a precedent for increased scrutiny of the due diligence and compliance responsibilities of legal and financial professionals operating within the digital asset space. As regulatory frameworks like MiCA in Europe evolve, and the SEC continues its enforcement actions in the United States, such settlements signal a heightened risk environment for entities that provide essential services to crypto firms. The emphasis on holding service providers accountable may lead to more rigorous compliance standards and professional liability insurance requirements within the sector, impacting how firms engage with and audit cryptocurrency businesses globally.
Judge Moore must provide preliminary approval for the second-wave settlements before they become effective. The plaintiffs have proposed a final approval hearing to be scheduled 90 days after this preliminary approval.
Based on materials from : www.theblock.co