FTX Fallout Deepens as Former Law Firm Agrees to $66M Settlement

FTX’s former law firm Fenwick and auditor Prager Metis agree to pay about $66M to settle customer fraud claims.

FTX customers may move closer to another recovery path after the exchange’s former law firm and auditor agreed to pay about $66 million to settle fraud claims.

Fenwick & West and Prager Metis deny wrongdoing, but the proposed deals add new pressure around claims linked to Sam Bankman-Fried’s collapsed crypto empire and customer losses in federal court filings this week.

Fenwick & West reaches $54 million settlement

FTX’s former law firm, Fenwick & West, agreed to pay $54 million to settle customer claims.

The proposed deal was filed in federal court in Miami. It still needs approval from U.S. District Judge K. Michael Moore.

Fenwick served as the main outside counsel for FTX US before the exchange collapsed in 2022.

Customers accused the firm of helping actions linked to Sam Bankman-Fried’s fraud. The firm denied wrongdoing and rejected those claims.

Customer lawyers said Fenwick “helped to craft and implement strategies that facilitated FTX’s fraud.” Fenwick said it “was not aware of the fraud at FTX.” The firm also said it stands by its legal work.

Some investors challenge the settlement process

Not every investor supports the settlement plan. A group of foreign plaintiffs asked the court to protect their separate claims.

The group includes investors from Hong Kong, Singapore, the UK, the EU, and South Korea.

The group includes 18 people and three corporate plaintiffs. They say their losses total more than $500 million.

They asked the judge not to enter orders that could affect their lawsuit.

Fenwick still faces a separate $525 million case in Washington, D.C. That lawsuit was filed by 20 FTX victims. It names Fenwick, several lawyers, and other defendants.

The Miami settlement does not resolve the Washington case. Judge Moore must grant preliminary approval before the new deals can move forward.

Customer lawyers asked for a final hearing 90 days after that approval.

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Auditor Prager Metis joins second settlement wave

Auditor Prager Metis agreed to pay $11.75 million in the same case. The firm had worked with FTX before the crypto exchange failed.

Its settlement brings the total from Fenwick and Prager Metis to about $66 million. Former NBA player Udonis Haslem also agreed to pay $420,000.

He had promoted FTX before the company entered bankruptcy. His deal adds to earlier settlements with other FTX promoters.

The new deals form a second wave of FTX settlements. An earlier wave covered 15 defendants, including Sam Bankman-Fried and former FTX executives.

It also included several celebrity and online promoters. The customer class may include millions of FTX users.

It covers people who hold crypto or cash on FTX. It also includes users of yield products and buyers of FTT.

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