FTX victims to receive $54M from Fenwick & West in settlement

Fenwick & West LLP, the law firm that advised the now-defunct FTX exchange, has agreed to pay $54 million to settle a 2023 class-action suit brought by former FTX customers. The settlement, reached as the case moves through U.S. courts, remains subject to judicial approval.

The plaintiffs contend that Fenwick “facilitated FTX’s fraud” by playing a pivotal role in how the alleged scheme operated. They allege the firm helped design and deploy legal structures and other mechanisms that obscured the misuse of customer funds, including transfers between FTX and its trading arm, Alameda Research, and created entities intended to avoid money-transmitter licensing. The claim is that these strategies enabled commingling of funds and aided the concealment of improper fund movements.

The filing indicates Fenwick had resisted the suit’s dismissal but eventually agreed to the settlement in February. A court still must approve the agreement before any payment is issued to plaintiffs. The development adds another layer to the sprawling legal aftermath of FTX’s 2022 collapse, which continues to reverberate through the crypto industry and invite closer scrutiny from regulators and lawmakers.

Key takeaways

• The law firm Fenwick & West will pay $54 million to settle a 2023 class action brought by former FTX customers; settlement approval remains pending.
• Plaintiffs allege Fenwick helped facilitate FTX’s alleged fraud by advising on entities and structures intended to hide customer funds and avoid licensing requirements.
• The case is part of the broader legal fallout from FTX’s 2022 collapse, which has intensified scrutiny of crypto firms and their advisers.
• The FTX Recovery Trust has distributed about $2.2 billion to creditors and customers in March, with another payout scheduled for May 29, underscoring ongoing asset-liquidation processes.
• Critics say the Trust has mismanaged asset liquidation, often selling recovered assets at discounts or below peak values reached after the collapse, highlighting concerns about the pace and pricing of distributions.

FTX estate distributions and questions over asset management

In March, the FTX Recovery Trust, the vehicle handling distributions to creditors and customers affected by the exchange’s failure, announced a distribution of roughly $2.2 billion. The next tranche of reimbursements is scheduled for May 29, but ongoing criticism from affected users centers on how assets have been liquidated. Several observers contend that the Trust has offloaded assets at prices well below potential peak values achieved in the wake of the collapse, potentially shortchanging victims of the exchange’s failure.

The handling of high-profile asset sales has become a focal point in debates about how to maximize recoveries for claimants while maintaining portfolio liquidity. One notable example cited by critics concerns a 5% stake in Cursor, an artificial intelligence company, that the Recovery Trust sold for about $200,000 in April 2023. By April 2026, the stake’s value was widely viewed as having the potential to reach around $3 billion, illustrating the tension between quick liquidity and the opportunity to realize higher future gains.

These dynamics occur amid broader regulatory and policy discussions about how to structure and supervise asset-recovery efforts in large-scale crypto insolvencies. As the FTX case continues to wind through courts and trust processes, investors and creditors are watching closely for signs of how future asset dispositions will be timed and priced, and whether additional legal actions or settlements may follow against other advisers or counterparties involved in the exchange’s operations.

Related coverage has noted the ongoing scrutiny of firms connected to FTX’s collapse and the broader implications for the crypto legal landscape, including questions about accountability for law firms and other service providers involved in high-profile crypto failures.

What comes next remains uncertain: the court must sign off on the Fenwick settlement, and the Recovery Trust’s asset-disposition strategy will likely continue to attract attention from creditors, regulators, and market watchers as the FTX saga evolves.

Readers should stay attentive to developments in the court approval process for Fenwick’s settlement, forthcoming distributions from the Recovery Trust, and any new disclosures about how asset sales and legal structuring influenced the handling of customer funds in the FTX era.