FTX users reach settlement with Fenwick over exchange fraud claims

In a major legal shift tied to the collapse of the cryptocurrency exchange FTX, users of the failed platform and Silicon Valley law firm Fenwick & West LLP have agreed to a proposed settlement in a long‑running lawsuit accusing the firm of helping to facilitate the massive fraud that led to the exchange’s downfall.

Filed in federal court in Florida, the class‑action lawsuit alleges that Fenwick played a central role in advising FTX in structuring aspects of its business that later enabled the misuse of customer funds and helped avoid certain regulatory requirements. Plaintiffs said the firm’s “substantial assistance” was integral to the fraud that left millions of users unable to access their assets after FTX collapsed in late 2022.

Although the terms of the settlement have not been publicly disclosed, both sides confirmed in a joint filing that they intend to submit the deal to the court for approval on February 27, 2026.

Several individuals raised concerns about the FTX fraud

Concerning the proposed settlement, sources with knowledge of the matter, who wished to remain anonymous due to its confidential nature, noted that the filing did not disclose specific details. 

What was uncovered was that both sides jointly asked the court to freeze all deadlines and pending motions in the class-action lawsuit until the settlement is submitted.

Meanwhile, it is worth noting that the lawsuit against Fenwick is part of a larger class-action suit submitted after the collapse of FTX in late 2022. Following this collapse, users have initiated legal proceedings against the exchange, famous figures have faced allegations of promoting it, and several firms have partnered with it.

Initially filed in 2023 and updated in August, the lawsuit claims Fenwick was instrumental in facilitating FTX’s fraud by providing substantial support to its operations.

This allegation prompted analysts to implement thorough investigations into FTX’s fraud. After the analysts’ intentions became public, sources sought to explain that Fenwick’s substantial assistance was the sole reason the fraud was possible. His efforts facilitated the establishment and approval of structures that promote various fraudulent activities.

Moreover, the lawsuit alleged that Fenwick provided guidance on navigating money transmitter licensing, understood how funds were being bounced, and had unclear boundaries between FTX and Alameda Research. 

Fenwick denies involvement with the massive FTX fraud

At first, Fenwick attempted to get the case withdrawn, alleging that it could not be held responsible for a fraud of which it was unaware. The company acknowledged that it provides standard and lawful legal services. 

In the meantime, after several considerations, the court decided to permit the amended FTX user complaint to proceed, denying Fenwick’s motion to dismiss the lawsuit.

When reporters reached out to Fenwick & West and the Moskowitz Law Firm representing FTX users for clarity on the situation, the firms declined to respond. Reports uncovered that this is not the first time FTX users have filed a lawsuit. In February 2024, they initiated legal action against Sullivan & Cromwell,

FTX’s former outside legal advisors. In this case, they accused the firm of playing a crucial role in the massive FTX fraud; however, eight months later, they dropped the lawsuit because they lacked adequate evidence.

The SEC seeks to withdraw a legal case against Gemini

Separately, the US Securities and Exchange Commission (SEC) made clear its intention to resolve its 2023 lawsuit against Gemini Trust Co. In this case, the agency alleged that the firm secured billions in funding through an unregistered crypto-lending program.

To demonstrate their commitment to dropping the case, both the federal agency and Gemini’s lawyers requested that a federal judge in New York dismiss it. According to the SEC, it adopted this decision after Gemini announced that it had settled with the New York State Department of Financial Services. Moreover, the regulated cryptocurrency exchange and custodian pledged to ensure that clients would receive a full recovery of their crypto assets.

As in previous instances, the SEC indicated that the dismissal was exercised in its discretion. Meanwhile, neither the SEC nor Gemini’s lawyer chose to respond to reporters’ requests for comment on the matter.

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