The Firm: How Silicon Valley’s Go-To Law Firm Became Entangled in the FTX Collapse

Section 1: Introduction: The Gatekeepers in the Dock

In the chaotic days of November 2022, the digital edifice of FTX, once a titan of the cryptocurrency world, crumbled with breathtaking speed. A modern-day bank run, fueled by whispers of insolvency and amplified by the instantaneous panic of social media, saw billions of dollars in customer assets vanish into a black hole of corporate malfeasance. The subsequent bankruptcy revealed a staggering fraud—a house of cards built on deceit and the commingling of customer funds with its sister hedge fund, Alameda Research. The architect of this empire, Sam Bankman-Fried (SBF), has since been tried, convicted, and, as detailed in the timeline of FTX’s collapse, sentenced to 25 years in prison, a decisive end to the reign of crypto’s erstwhile king.

Yet, while the kingpin is in chains, the story of the FTX collapse is far from over. The focus of the sprawling legal fallout is now pivoting from the flamboyant perpetrators to the discreet but essential enablers—the ecosystem of elite professional firms that lend credibility, structure, and a veneer of legitimacy to the titans of modern finance. In this new chapter, one name has been singled out from a field of over 130 law firms that worked with the crypto exchange: Fenwick & West LLP.

Fenwick & West is not just another law firm. It is a Silicon Valley institution, a legal powerhouse born alongside the tech industry itself, as chronicled in Fenwick’s firm history. For decades, its name has been synonymous with innovation, its lawyers the trusted advisors to generations of entrepreneurs and venture capitalists. Consistently ranked in the highest tier for its work with startups and emerging companies, Fenwick has guided tech royalty from initial funding rounds to blockbuster IPOs, representing a client roster that reads like a who’s who of the digital age. It is this very prestige that now lies at the heart of an explosive, amended class-action lawsuit filed by thousands of defrauded FTX customers. The suit alleges that Fenwick was not merely a passive legal advisor but a “key and crucial” accomplice in what prosecutors have called one of the largest financial frauds in U.S. history, a claim explored in a recent Daily Journal report on the class action.

This legal battle represents a landmark test for the concept of “gatekeeper liability” in the 21st century. It probes a fundamental and uncomfortable question for the legal profession: where does zealous representation of a client end, and active complicity in their crimes begin? Bolstered by a damning independent examiner’s report from the FTX bankruptcy and explosive testimony from SBF’s own criminal trial, plaintiffs argue that Fenwick & West decisively and knowingly crossed that line.

The lawsuit signals a critical shift in the FTX narrative. The initial story focused on the idiosyncratic failings of a charismatic founder and his small circle of insiders—a classic “bad apple” theory of corporate collapse that resulted in a $12.7 billion judgment against FTX. However, by targeting Fenwick so specifically, plaintiffs are advancing a far more unsettling thesis. They contend that a fraud of this scale and sophistication would have been impossible without the “substantial assistance” of a top-tier law firm providing the architectural blueprints. This reframes the FTX implosion not simply as a crime, but as a profound institutional failure, implicating the very professional structures meant to provide checks and balances on corporate power. The outcome of this case will reverberate far beyond the world of crypto, sending shockwaves through the boardrooms and legal departments of Wall Street and Silicon Valley alike.

Section 2: Architects of the Abyss: Deconstructing the Allegations

At the heart of Fenwick & West’s defense is the assertion that its work for the FTX Group amounted to nothing more than “routine” legal services for a complex, high-growth global enterprise. The plaintiffs, in a sprawling 220-page amended complaint, seek to systematically dismantle this narrative. They argue that the firm’s role went far beyond that of a typical outside counsel, positioning Fenwick as an essential, integrated partner in the fraudulent scheme—a firm with what a court-appointed examiner called a “bird’s-eye view” of the entire illicit operation.

Blueprint for a Heist

The lawsuit alleges that Fenwick did not just advise on a pre-existing business structure but was, in fact, the chief architect of the very corporate machinery that made the fraud possible. The claims paint a picture of lawyers not as counselors, but as engineers of a financial heist.

The most potent allegations center on the creation of what the complaint calls “shadowy entities” and “opaque affiliated entities”. The prime example cited is a little-known entity named North Dimension Inc. According to the plaintiffs, Fenwick created this Alameda subsidiary, which was then used as a front to open bank accounts that appeared to be for FTX but were in fact controlled by Alameda. This structure allegedly served as the primary pass-through for siphoning FTX customer deposits directly into Alameda’s coffers, effectively building the plumbing for the multi-billion-dollar misappropriation. This was not, the plaintiffs argue, standard corporate formation; it was the creation of a purpose-built vehicle for commingling and theft.

Furthermore, the complaint attacks Fenwick’s simultaneous representation of both FTX and Alameda Research. It alleges the firm “agreed to create, managed and represented clearly conflicted companies” without erecting any of the standard legal or ethical firewalls necessary to prevent abuse. In the plaintiffs’ view, this dual representation was a foundational breach of duty, allowing Fenwick to oversee a system where one client (Alameda) was systematically looting the other (FTX) without raising alarms. The lawsuit goes on to claim that Fenwick’s lawyers devised and approved the legal structures for sham “loans” that allowed SBF and other insiders to extract hundreds of millions of dollars in customer funds for personal use, including for real estate purchases and political donations.

The Revolving Door and the Price of Prestige

The lawsuit argues that the firm’s alleged complicity was enabled by an “exceedingly close” relationship with FTX, one that blurred the lines between independent counsel and embedded business partner. A central feature of this relationship was a “pipeline of key personnel” who moved from senior positions at Fenwick directly into the highest echelons of the FTX empire.

Two figures are central to this claim. The first is Daniel Friedberg, the former Seattle-based chair of Fenwick’s payments practice. In 2020, Friedberg left the firm to join FTX, eventually becoming its Chief Compliance Officer and the general counsel for Alameda Research. The second is Can Sun, a former Fenwick associate who became FTX’s General Counsel. This “revolving door” created a critical vulnerability. It fostered a level of familiarity and trust that may have fatally compromised the professional skepticism and arm’s-length independence required of outside counsel. Requests for legal work coming from a former senior partner and colleague like Friedberg would likely be treated with less scrutiny than those from a typical client. The dynamic shifts from a purely professional engagement to one colored by personal history and loyalty, creating an environment where the gatekeeper can be captured by the client.

This close relationship, plaintiffs allege, allowed FTX to weaponize Fenwick’s sterling reputation. The lawsuit claims that SBF deliberately used the “great Fenwick name” on promotional materials and in discussions with investors to “gain instant credibility”. In the high-stakes world of venture capital, the quality of a startup’s professional advisors is a key metric in due diligence. The presence of a “Band 1” firm like Fenwick & West on FTX’s side provided a powerful signal of institutional rigor and legitimacy, reassuring investors that their money was in a well-managed, legally sound enterprise. In this context, Fenwick’s reputation was not merely a passive asset but an active tool allegedly used to lure in the very investors who would ultimately be defrauded. The firm, in this telling, was not just providing legal services; it was selling its credibility, which FTX then leveraged as a key component of its fraudulent enterprise.

Section 3: The Paper Trail: Evidence from the Wreckage

What elevates the lawsuit against Fenwick & West from a collection of allegations to a formidable legal threat is the trove of evidence that has emerged from the wreckage of the FTX bankruptcy and SBF’s criminal trial. This evidence, plaintiffs claim, provides independent corroboration of the firm’s deep entanglement and, most critically, its knowledge of the fraud.

The Examiner’s Bombshell

The cornerstone of the plaintiffs’ case is the May 2024 report from Robert J. Cleary, a former federal prosecutor appointed by the bankruptcy court as an independent examiner. Cleary’s mandate was not to advocate for any party but to investigate and report facts to the court. After a review of more than 200,000 internal documents, many directly related to Fenwick, his conclusions were devastating for the law firm.

The report fundamentally alters the legal landscape. Before its release, the case was the word of alleged victims against a prestigious firm. After, it is the word of a court-sanctioned, neutral investigator validating the plaintiffs’ central claims. This provides immense credibility and leverage, making Fenwick’s “routine services” defense significantly harder to sustain. It is no longer just an allegation from an adversary; it is a finding from an independent inquiry.

Cleary’s report found that Fenwick was “directly involved” in FTX’s efforts to “obfuscate from government regulators and investors the close relationship between FTX Trading and Alameda”. It concluded that the firm’s work “closely intersected with core aspects of the FTX Group’s improper operations and management”. More specifically, the report detailed Fenwick’s involvement in structuring at least $2 billion in “founder loans” that were used to shuffle cash and assets among FTX entities and “directly into the personal accounts” of its leaders. The examiner’s overall assessment, cited repeatedly in the amended complaint, is that Fenwick was “deeply intertwined in nearly every aspect of FTX Group’s fraud and wrongdoing”. For this work, the firm earned fees totaling $22 million.

Whispers from the Witness Stand

If the examiner’s report provides the wide-angle view of Fenwick’s involvement, testimony from SBF’s criminal trial offers the potential smoking gun. The lawsuit leans heavily on new information gleaned from cooperating FTX insiders who testified against their former boss.

The most damning claim comes from Nishad Singh, FTX’s former Director of Engineering and a member of SBF’s inner circle. According to the amended complaint, Singh testified that he personally and explicitly informed Fenwick lawyers of the ongoing fraud. The filing alleges that Singh told the firm about the misuse of customer funds, the existence of improper loans to insiders, and the false representations being made to the public and investors. Even more explosively, the lawsuit claims that after being put on notice, Fenwick “advised on how to facilitate and hide these very acts”.

This allegation creates a “moment of truth” for the firm that will likely become the focal point of the litigation. Proving what a third party like a law firm knew is notoriously difficult and often relies on piecing together circumstantial evidence. However, Singh’s testimony, if deemed credible, provides direct evidence. It transforms the case from a debate over what Fenwick should have known to a question of what it was explicitly told. The allegation that the firm then advised on concealment elevates the claim from aiding and abetting to outright conspiracy. The entire case could ultimately hinge on a jury’s assessment of Singh’s credibility versus that of the Fenwick attorneys with whom he interacted.

Adding another layer of complexity, SBF himself attempted to mount an “advice of counsel” defense during his trial, claiming he relied on Fenwick’s guidance for critical business matters, including his company’s flawed compliance policies and communication strategies. While this failed to exonerate SBF, plaintiffs now wield it as a sword, arguing it is a tacit admission of the firm’s deep, operational involvement in the very areas where the fraud occurred.

A Culture of Concealment

Rounding out the evidence are indications of what plaintiffs characterize as a deliberate culture of concealment. Both the examiner’s report and the lawsuit highlight the use of auto-deleting messages on the encrypted app Signal among FTX executives, a practice Fenwick allegedly helped implement and advise on. Plaintiffs frame this not as a routine data retention policy but as an “obstruction” tactic designed to prevent the creation of a paper trail. Furthermore, the firm has been served with federal law enforcement subpoenas, the details of which remain under seal but confirm that Fenwick is a subject of interest in ongoing government investigations beyond this civil suit.

Table 1: Key Players and Entities in the FTX-Fenwick & West Saga

Section 4: The Stonewall: Fenwick’s “Routine Services” Defense

Facing a legal and reputational crisis, Fenwick & West has mounted a robust defense, hiring the formidable law firm defense practice at Gibson, Dunn & Crutcher to represent it. Led by partners Kevin Rosen and Nancy Hart, the firm filed a motion to dismiss the lawsuit, articulating for the first time its official counter-narrative. The defense strategy is built on a clear and consistent message: Fenwick was a law firm providing standard legal services to a client, not a co-conspirator in its crimes.

The Core Argument

The central pillar of Fenwick’s defense is the argument that its work for FTX constituted “routine” legal services, consistent with the needs of a sophisticated and rapidly expanding technology client. The firm maintains that it had no actual knowledge of the underlying fraud being perpetrated by SBF and his inner circle. This defense attempts to create a high-stakes legal battle over the very definition of “routine” in the context of a novel and largely unregulated industry like cryptocurrency. Fenwick’s position implies that creating complex international corporate structures, advising on novel financial instruments, and managing intertwined entities is standard practice for a global fintech client. The plaintiffs, of course, argue that creating entities with no internal controls, representing clearly conflicted parties, and advising on methods of concealment are fundamentally outside the bounds of legitimate legal work.

The Attorney-Client Shield

Fenwick’s legal strategy leans heavily on the well-established principle of the “attorney-client shield.” This doctrine holds that lawyers cannot be held liable for the misconduct of their clients merely for providing legal advice and services. In its motion to dismiss, Fenwick argued that it cannot be held accountable for aiding a client’s wrongdoing as long as its “conduct falls within the scope of the representation of the client”. This legal framing is crucial, as it seeks to place a wall between the firm’s actions (providing legal services) and the client’s crimes (fraud). It portrays Fenwick as a victim of its client’s deception, rather than a participant in it.

The firm has also sought to downplay the evidence against it. For example, in response to an email from Daniel Friedberg that explicitly mentioned Alameda holding FTX customer funds, Fenwick’s lawyers argued in court filings that the communication did not “plausibly allege that Fenwick knew of FTX’s alleged violation”. Following the release of the examiner’s report, a firm spokesperson stated that Fenwick “stands behind the integrity of the work we performed” and insisted that the report “did not include any finding of wrongdoing on Fenwick’s part”. This statement is a matter of interpretation; while the report did not make a formal legal conclusion of liability, its factual findings that the firm was “directly involved” in “improper operations” are the very findings the plaintiffs are using to build their case for wrongdoing.

Hiring the “A-Team”

The decision to retain Gibson, Dunn & Crutcher is, in itself, a significant part of the story. It is a clear signal to the plaintiffs and the broader market that Fenwick views the lawsuit as an existential threat and is prepared to deploy every available resource to fight it. Gibson Dunn’s reputation in defending major law firms is unparalleled, and their involvement ensures that the litigation will be a hard-fought, complex, and expensive battle over novel points of law and fiercely contested facts.

Section 5: Ghosts of Crises Past: Legal Precedent and the Shadow of Enron

The lawsuit against Fenwick & West does not exist in a legal vacuum. It is the latest in a series of high-profile cases that test the boundaries of liability for professional firms that serve as gatekeepers to the financial markets. To understand the stakes, one must look at the significant legal hurdles plaintiffs face and the historical precedents that haunt such litigation.

The High Bar for Aiding and Abetting

At its core, the case against Fenwick is an “aiding and abetting” claim. Such claims are notoriously difficult to prove against third parties like law firms. The legal standard, which varies slightly by jurisdiction, generally requires plaintiffs to prove three elements: first, that a primary violation occurred (SBF’s fraud); second, that the defendant (Fenwick) had “knowledge” of that violation; and third, that the defendant provided “substantial assistance” to the perpetrator, as outlined in the American Bar Association’s resources on the topic.

The most formidable hurdle is proving “knowing participation.” Courts are reluctant to hold professionals liable for their clients’ actions without clear evidence that they were aware of the wrongdoing. This “knowledge” element is the legal tightrope the plaintiffs must walk. The standard can range from requiring “actual knowledge”—a high bar demanding direct proof that the firm knew the fraud was occurring—to a lower standard of “constructive knowledge,” where liability can attach if the firm should have known about the fraud given the circumstances. The testimony of Nishad Singh is the plaintiffs’ attempt to meet the higher “actual knowledge” standard, transforming the case from one of professional negligence to one of active complicity.

Echoes of Enron

This legal battle inevitably conjures the ghost of a previous corporate cataclysm: the 2001 collapse of Enron. That scandal similarly cast a harsh spotlight on the professional firms that had enabled its complex accounting fraud. Enron’s primary law firm, Vinson & Elkins, faced intense scrutiny and litigation for its role in blessing questionable transactions and conducting an internal investigation that was widely seen as a “whitewash.” The Enron saga established that gatekeepers—auditors and lawyers alike—could be held accountable for their clients’ sins, leading to massive settlements and the utter destruction of accounting giant Arthur Andersen, drawing parallels to the FTX creditor litigation.

The legislative response to Enron, the Sarbanes-Oxley Act of 2002, sought to formally redefine the role of corporate lawyers, imposing a “reporting up” requirement that obligates them to escalate evidence of misconduct within a company, effectively codifying their duty as gatekeepers. The FTX case now serves as a major test of these principles in the largely unregulated crypto space.

However, the case against Fenwick is arguably a more direct and potent test of lawyer complicity than what emerged from the Enron fallout. In the Enron scandal, the fraud was primarily accounting-based, placing the auditors at the absolute epicenter. The FTX fraud, as alleged by plaintiffs, was fundamentally about flawed legal structures that were purpose-built to enable theft. This distinction places the law firm that allegedly designed those structures in a more central, architectural role. Coupled with direct evidence from the examiner’s report and insider testimony, the case against Fenwick presents a more concentrated and potentially provable claim of a law firm’s direct involvement in the mechanics of a fraud than was seen in the Enron litigation.

Deploying the “Nuclear Option”: RICO

In a sign of their aggressive legal strategy, the plaintiffs have included claims under the Racketeer Influenced and Corrupt Organizations Act (RICO). This is a legal “nuclear option,” a statute originally designed to prosecute the Mafia and other forms of organized crime. By invoking RICO, plaintiffs are alleging that Fenwick was not just a negligent or reckless advisor, but an essential member of a criminal “enterprise.” While difficult to prove, a RICO claim carries the threat of treble damages and severe reputational harm, dramatically increasing the pressure on Fenwick to settle the case.

Section 6: Conclusion: A Reckoning for the Profession

Regardless of its ultimate verdict, the class-action lawsuit against Fenwick & West has already succeeded in putting the entire legal profession on trial. It forces a deeply uncomfortable but necessary reckoning with the role and responsibilities of lawyers in a modern financial landscape characterized by disruptive innovation, regulatory ambiguity, and immense fortunes created overnight. The case’s conclusion, whether reached through a settlement or a jury verdict, will have profound and lasting implications.

A Chilling Precedent?

Should the plaintiffs prevail, the verdict could set a powerful and potentially chilling precedent for law firms that advise clients in emerging, high-risk sectors. A finding of liability against a firm of Fenwick’s stature would dramatically recalibrate the risk-reward calculation for representing companies in crypto, artificial intelligence, and other frontier technologies. The fear of facing multi-billion-dollar lawsuits for a client’s unforeseen implosion could lead to a “chilling effect.” This might not be entirely negative, as it could force firms to conduct more rigorous due diligence and adopt a more skeptical, quasi-regulatory posture with their clients.

However, this could inadvertently stifle innovation. If the most sophisticated law firms become too risk-averse to counsel startups navigating legal and regulatory gray areas, it could create a “legal desert” for the very companies pushing technological boundaries. This could lead to a bifurcation where well-funded, “safe” companies receive top-tier legal advice while true innovators are either priced out or forced to rely on less-qualified counsel, potentially leading to more compliance failures, not fewer. The attempt to enforce accountability could have the paradoxical effect of making the next FTX more, not less, likely.

The Price of Prestige

The case is also a stark cautionary tale about the commodification of reputation. Fenwick & West built its brand over five decades, becoming a pillar of the Silicon Valley establishment. That hard-won prestige is now at risk, with plaintiffs alleging it was leveraged as a tool to legitimize a fraudulent enterprise. The lawsuit highlights the acute risks for elite professional firms that have, as some analysts suggest, “put their eggs in one basket” by focusing so heavily on the volatile technology sector. The “growth at all costs” mentality of the 2020-2021 tech bubble fueled both FTX’s meteoric rise and the over-hiring at firms like Fenwick. Now, the industry is facing a painful hangover of accountability.

The lawsuit against Fenwick is not an isolated event but a symptom of this broader systemic reckoning. It represents the legal and financial system’s attempt to impose order and consequences on the excesses of the last speculative bubble, with Fenwick serving as a high-profile proxy for the entire professional class that enabled it. The ghosts of FTX will haunt the corridors of Big Law for years to come, forcing a fundamental re-evaluation of what it means to be a gatekeeper in an age of unprecedented disruption.