FTX Users Seek Court Approval for Settlement With Fenwick & West
What Has Been Agreed So Far?
FTX users and Silicon Valley law firm Fenwick & West have reached a proposed settlement in a lawsuit that accused the firm of contributing to the fraud behind the collapse of the crypto exchange, according to a joint court filing submitted on Friday.
Lawyers for both sides told a Florida federal court that they plan to submit the settlement for approval on Feb. 27. While the filing confirms that an agreement has been reached in principle, it does not disclose financial terms or other details. The parties also asked the court to pause all deadlines and pending motions in the case until the settlement is reviewed.
The lawsuit was first filed in 2023 and later amended in August as part of a broader multidistrict litigation that followed FTX’s collapse in late 2022. That wider legal effort has targeted not only the exchange itself, but also service providers, advisers, and public figures accused of helping promote or enable the business.
Investor Takeaway
What Were FTX Users Alleging Against Fenwick?
FTX users accused Fenwick & West of playing “a key and crucial role in the most important aspects of why and how the FTX fraud was accomplished,” according to the amended complaint. The lawsuit claimed the exchange’s failure “was only possible because Fenwick provided ‘substantial assistance’ by creating and approving the structures that allowed numerous frauds.”
Among the allegations, users said Fenwick advised FTX on corporate arrangements that helped the company avoid money transmitter registration requirements. They also claimed the firm had insight into the commingling of customer funds and the blurred operational lines between FTX and affiliated trading firm Alameda Research.
The complaint argued that these structural decisions were not peripheral legal work, but central to how FTX operated and ultimately collapsed. Fenwick, however, has consistently rejected that characterization.
The law firm sought to dismiss the case, arguing it was “not liable for aiding and abetting a fraud it knew nothing about” and that it had provided “routine and lawful legal services.” In November, the court rejected Fenwick’s motion to dismiss, allowing the amended complaint to proceed.
Why the Case Matters Beyond FTX
The lawsuit against Fenwick sits within a broader effort by FTX users to extend accountability beyond the exchange’s former executives. Following FTX’s bankruptcy, users filed multiple lawsuits against outside firms, advisers, and promoters, arguing that professional gatekeepers failed to stop, or indirectly enabled, misconduct.
That strategy has produced mixed results. In February 2024, FTX users also sued Sullivan & Cromwell, the exchange’s former outside counsel, accusing the firm of playing a role in the multibillion-dollar fraud. That complaint was voluntarily dismissed eight months later after plaintiffs said they lacked sufficient evidence to proceed.
The contrast between the Sullivan & Cromwell case and the Fenwick litigation highlights how difficult it can be for plaintiffs to prove liability against legal advisers. Courts have generally required clear links between advice given and alleged wrongdoing, rather than broad claims tied to a client’s later failure.
The Fenwick case progressed further than many similar suits, in part because the court allowed the amended complaint to survive an early dismissal attempt. That procedural outcome likely increased incentives on both sides to explore a negotiated resolution.
Investor Takeaway
What Happens Next?
The next step is formal submission of the settlement to the court on Feb. 27. The judge will review whether the agreement meets legal standards for fairness in a class-action context. Until then, the terms remain confidential, and the court has been asked to halt further procedural activity.
Neither Fenwick & West nor the Moskowitz Law Firm, which represents FTX users, responded immediately to requests for comment. Fenwick has previously denied any wrongdoing and has not conceded liability as part of the proposed settlement, based on the available court filings.
If approved, the settlement would close one of the more prominent lawsuits aimed at professional advisers in the FTX fallout. It would not resolve claims against other defendants tied to the exchange, nor would it affect ongoing criminal cases related to FTX’s former leadership.
