FTX’s former law firm hit with lawsuit alleging it set up shadowy entities

August 9, 2023 Coin Telegraph

The suit claims “shadowy entities” set up by Fenwick & West were allegedly used by FTX and former top executives to misappropriate customer funds.

FTX’s former primary counsel Fenwick & West LLP has been hit with a class-action suit claiming it aided the crypto exchange’s alleged multi-billion dollar fraud.

An Aug. 7 filing by a group of FTX customers in a California District Court alleged the law firm set up several “shadowy entities” allowing FTX co-founder Sam Bankman-Fried and other executives to adopt “creative but illegal strategies” to perpetuate fraud.

The suit claims Fenwick & West provided services to FTX that “went well beyond those a law firm should and usually does provide,” such as structuring acquisitions by FTX US in ways that circumvented regulatory scrutiny and supplying staff to execute strategies the law firm proposed.

The “shadowy entities” were named as North Dimension and North Wireless Dimension, which the suit alleged siphoned misappropriated FTX customer funds.

*Highlighted excerpt from the class complaint against Fenwick & West. Source: CourtListener*

The plaintiffs said Fenwick & West aided and abetted FTX’s alleged fraud by choosing not to intervene in a series of misrepresentations supposedly made by FTX to its customers.

There was an implied agreement between FTX US, other FTX affiliates and Fenwick & West to deceive customers, the class suit said — something that appealed to the law firm because it “stood to gain financially” from FTX’s alleged misconduct, it added.

Bankman-Fried, former Alameda Research CEO Caroline Ellison, former FTX co-founder Gary Wang and former FTX engineering lead Nishad Singh were the four so-called FTX insiders listed by the plaintiffs.

Fenwick & West was named in a similar class-action lawsuit in February that also alleged it assisted Bankman-Fried and FTX in setting up its business.

The February lawsuit — which also targeted FTX investor and venture capital firm Sequoia Capital — claimed the services provided by Fenwick & West were central to Bankman-Fried’s fraud.

The law firm recently hired peer firm Gibson Dunn to assist with legal matters related to its alleged role at FTX, according to a June 21 Reuters report.

FTX collapsed and filed for bankruptcy in November 2022 when it was unable to process a large volume of customerwithdrawals.

Bankman Fried remains under house arrest and faces 12 charges including wire fraud, conspiracy and money laundering. He is set to have two criminal trials in October and March.

Prosecutors said on Aug. 8 that they plan to re-add a charge relating to illegal campaign finance, which was previously dropped due to it potentially violating a treaty obligation with the Bahamas.

Cointelegraph contacted Fenwick & West for comment but did not immediately receive a response.

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SBF and FTX fraud ‘aided and abetted’ by Silvergate Bank, alleges lawsuit

February 15, 2023 Coin Telegraph

Alan Lane

The filing is the latest proposed class action in a string of lawsuits aimed at Silvergate over the last two months about its links with Sam Bankman-Fried and defunct crypto exchange FTX.

Silvergate Bank and its CEO Alan Lane have been accused of “aiding and abetting” a “multibillion-dollar fraudulent scheme orchestrated by Sam Bankman-Fried (SBF)” and two of his entities, FTX and Alameda Research, in a newly proposed class action lawsuit.

The proposed class-action lawsuit was filed in the United States District Court of the Northern District of California on Feb. 14 by lawyers representing a San Francisco-based FTX user who — just like all other FTX customers — was frozen out of around $20,000 in crypto when the exchange collapsed last year.

Plaintiff Soham Bhatia alleges that Silvergate Bank, its parent company Silvergate Capital Corporation and CEO Alan Lane were aware of the use of FTX customer funds by Alameda Research and has accused them of concealing “the true nature of FTX” from its customers.

“At all relevant times, Silvergate, Bankman-Fried and Lane were each co-conspirators of the other,” according to the lawsuit, adding:

Silvergate $SI is now the most shorted stock (73% of float)

Yep the bank who according to the class-action lawsuit directly „aided and abetted FTX’s fraud“ pic.twitter.com/k2zSb41pgD
— Yoda Research (@YodaResearch) February 14, 2023

Silvergate and Lane aided and abetted, encouraged and substantially assisted Bankman-Fried in jointly perpetrating a fraudulent scheme upon Plaintiff and the class.

“By aiding, abetting, encouraging and substantially assisting the wrongful acts, omissions and other misconduct alleged above, Defendants acted with an awareness of their wrongdoing and realized that their conduct would substantially aid the accomplishment of their illegal design.”

The suit seeks a combination of damages, restitution and disgorgement of profits with the amount to be determined in trial.

However, the lawsuit is yet to be certified by the district court, which is a necessary step before it can proceed as a class action.

The latest proposed lawsuit is just another class-action complaint filed against Silvergate over the last two months.

On Dec. 14, plaintiff Joewy Gonzalez filed a similar class-action suit in the California Southern District Court — accusing Silvergate of its alleged role in “furthering FTX’s investment fraud” by aiding and abetting the crypto exchange when it placed FTX user deposits into the bank accounts of Alameda.

On Jan. 10, a class-action suit was filed against Silvergate Capital Corporation in the United States District Court of Southern California alleging that Silvergate’s platform failed to detect occurrences of money laundering “in amounts exceeding $425 million” involving South American money launderers.

On Feb. 6, algorithmic trading firm Statistica Capital filed a putative class-action lawsuit against Signature Bank alleging it had “actual knowledge of and substantially facilitated the now-infamous FTX fraud.”

We have to read a bit, but this is a very clear description of the role of Signature Bank, the FTX-Alameda intertwining of funds and all that.

It takes industry insiders to reveal the internal dynamics and this is what happens here. https://t.co/0DCcYPUDlT
— Simon Lelieveldt - finhstamsterdam@m.st...n.social (@finhstamsterdam) February 13, 2023

“In particular, Signature knew of and permitted the commingling of FTX customer funds within its proprietary, blockchain-based payments network, Signet,” it wrote.

Cointelegraph has reached out to Silvergate for comment but did not receive a response at the time of publication.

Logan Paul and CryptoZoo hit with lawsuit as investors take action

February 3, 2023 Coin Telegraph

Case

Plaintiff Don Holland has filed a lawsuit against CryptoZoo and Logan Paul, alleging the YouTube influencer’s “fraudulent venture” executed a “rug pull.”

CryptoZoo and Logan Paul have been named as defendants in a newly filed class-action lawsuit, which alleges they stole millions of dollars worth of purchaser's cryptocurrency via a "fraudulent venture."

In a court filing on Feb. 2 in the District Court of the Western District of Texas, plaintiff Don Holland alleged that Paul and executives at CryptoZoo (CZ) “executed a ‘rug pull’” by promising purchasers of the nonfungible tokens (NFTs) exclusive access to crypto assets among other benefits, but ultimately abandoned the project and kept the funds.

"As part of Defendants’ NFT scheme, Defendants marketed CZ NFTs to purchasers by falsely claiming that, in exchange for transferring cryptocurrency to purchase the CZ NFT, purchasers would later receive benefits, including, among other things, rewards, exclusive access to other cryptocurrency assets, and the support of an online ecosystem to use and market CZ NFTs," it wrote.

We have officially filed a class action lawsuit in the Western District of Texas against Logan Paul et al. for the CryptoZoo fiasco. (This is in addition to the numerous cases heading to arbitration on the matter.) pic.twitter.com/BIC5v63TGZ
— AttorneyTom (@attorney_tom) February 2, 2023

"In reality, soon after completing the sale of all their CZ NFTs, Defendants, together with others [...] transferred millions of dollars’ worth of purchasers’ cryptocurrency to, among other places, wallets controlled by Defendants," it alleged.

The lawsuit was submitted by attorneys from Ellzey & Associates and Attorney Tom and Associates, the latter of which is the law firm run by YouTube personality Attorney Tom.

In a YouTube video on Jan. 16, Attorney Tom told viewers that they are suing Paul over the alleged crypto scam after “weeks of investigation and speaking to a number of Crypto Zoo victims.”

Other defendants named in the suit include Danielle Strobel, Jeff Levin, Eddie Ibanez, Jake Greenbaum (Crypto King) and Ophir Bentov (Ben Roth), according to Attorney Tom.

This lawsuit comes despite Paul unveiling a $1.5 million recovery plan for disgruntled investors in the CryptoZoo project via a video on Twitter on Jan. 13.

He also revealed that he is no longer going to sue CoffeeZilla over his allegations that his project is a scam, stating that suing him is “not going to help Cryptozoo holders,” adding that he wants to focus on “fans and supporters of him.”

Paul outlined his recovery plan will consist of three stages — stating the first stage will be himself and the co-founder of CryptoZoo, Jeff Levin, burning their ZOO token holdings.

He clarified in doing this they will “have no financial upside” in the game, and it will “add value to the holders’ tokens.”

Paul claimed the second stage will involve him personally committing 1,000 Ether (ETH) to the project so that “disappointed” investors can burn their NFTs to get their initial investment of 0.1 ETH back, the cost to mint the NFT.

Meanwhile the third and final stage he hopes to “deliver the game as outlined in the whitepaper.”

Argo Blockchain accused of misleading investors in class action lawsuit

January 27, 2023 Coin Telegraph

Argo Blockchain

After a torrid 2022 that saw it sell off its flagship mining facility, Argo Blockchain's woes are worsening after a recent class action suit.

Investors of crypto mining firm Argo Blockchain have filed a class action lawsuit accusing the miner of making untrue statements and omitting key information during its initial public offering (IPO) in 2021.

A newly filed lawsuit on Jan. 26 is aimed at Argo and several of its executives and board members. It claims the firm failed to disclose how susceptible it was to capital constraints, electricity costs and network difficulties.

"The Offering Documents were negligently prepared and, as a result, contained untrue statements of material fact or omitted to state other facts necessary to make the statements made not misleading," the lawsuit read.

As a result, the investors claim the business was “less sustainable” than they had been led to believe which led to an overstatement of the miner’s financial prospects. The complaint noted:

“Had [the investors] known the truth, they would not have purchased or otherwise acquired said securities, or would not have purchased or otherwise acquired them at the inflated prices that were paid.”

Argo released the information in question on Sep. 23, 2021, when the firm filed documents with the United States Securities and Exchange Commission (SEC) relating to its IPO.

7.5 million shares were issued to the public on the same date at an offering price of $15 resulting in proceeds of $105 million before expenses.

Since then, the miner’s share price has taken a beating and is currently trading at $1.96 per share after having fallen as low as $0.36.

*The share price decline of Argo Blockchain from Sep. 2021 to present. Source:* *Yahoo! Finance*

Cointelegraph requested comment from Argo but did not immediately receive a response.

The recent lawsuit comes just days after Argo regained compliance with Nasdaq’s listing rule on Jan. 23, which requires a company to maintain a minimum closing bid price of $1 for 10 consecutive trading days.

Argo has had to make some difficult decisions to weather the ongoing bear market and tough conditions facing crypto miners. It announced on Dec. 28 that it would be selling its flagship mining facility, Helios, to digital asset investment manager Galaxy Digital for $65 million.

The Helios mining facility during its grand opening. Source: YouTube

Crypto miners in general had a torrid year in 2022 — with high electricity prices, falling crypto prices and increased mining difficulty all eating into their bottom line.

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LastPass data breach led to $53K in Bitcoin stolen, lawsuit alleges

January 5, 2023 Coin Telegraph

Breach

A class action is seeking damages from the password manager following a data breach in August 2022.

A class action lawsuit has been filed against password management service LastPass following a data breach from Aug. 2022.

The class action was filed with the U.S. district court of Massachusetts on Jan. 3, by an unnamed plaintiff known only as “John Doe” and on behalf of others similarly situated.

It alleges that the data breach of LastPass has resulted in the theft of around $53,000 worth of Bitcoin.

The plaintiff claimed he began accruing BTC in Jul. 2022 and updated his master password to more than 12 characters using a password generator, as recommended by the LastPass “best practices.”

This was done to enable the storage of private keys in the seemingly secure LastPass customer vault.

When news of the data breach broke, the plaintiff deleted his private information from his customer vault. LastPass was hacked in Aug. 2022, with the attacker stealing encrypted passwords and other data, according to a December statement from the company.

Despite the quick action to delete the data, it appeared to be too late for the plaintiff. The lawsuit read:

“However, on or around Thanksgiving weekend of 2022, Plaintiff’s Bitcoin was stolen using the private keys he stored with Defendant [LastPass].”

“The LastPass Data Breach has, through no fault of his own, exposed him to the theft of his Bitcoin and exposed him to continued risk,” it added.

The suit claims that victims have been put at increased substantial risk of future fraud and misuse of their private information, which may take years to manifest, discover, and detect.

LastPass is being accused of negligence, breach of contract, unjust enrichment, and breach of fiduciary duty, however, the figure sought in damages was not specified.

According to cybersecurity researcher Graham Cluley, the stolen data includes unencrypted information including company names, user names, billing addresses, telephone numbers, email addresses, IP addresses, and website URLs from password vaults.

r/t LostPass?

After the LastPass hack, here’s what you need to know...https://t.co/8x47Vze0lb
— Graham Cluley (@gcluley) January 4, 2023

In December, LastPass admitted that if customers had weak Master Passwords, the attackers may be able to use brute force to guess this password, allowing them to decrypt the vaults.

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Class action against Kim K, Mayweather over EMAX dismissed… for now

December 8, 2022 Coin Telegraph

class action

Despite dismissing the case, the judge acknowledged the lawsuit reflects a potentially dangerous trend of fraudulent-like promotional schemes.

A federal judge in California has dismissed a class action lawsuit against reality TV star Kim Kardashian, boxing champ Floyd Mayweather and the founders of EthereumMax, explaining that the submissions failed to meet the “heightened pleading standards” for fraud claims.

The judge has, however, left room for the plaintiffs to refile the proposed class action lawsuit if certain provisions are amended.

In the original Jan. 7 court filing submitted by Scott+Scott Attorneys At Law, the plaintiffs argued that Kardashian, Mayweather, and also former NBA superstar Paul Pierce didn’t disclose they were being paid to promote EthereumMax (EMAX).

The plaintiffs alleged that they promoted it with the objective to “artificially inflate the price of the token” through the use of “false or misleading statements.”

Kim Kardashian promoted EMAX in a Jun. 2021 post on Instagram, while Floyd Mayweather wore the EMAX logo on his boxing trunks in a boxing match against YouTube star Logan Paul in the same month.

According to reports, Judge Michael Fitzgerald dismissed the lawsuit on Dec. 7 on the grounds that the fraud allegations lacked merit and that investors at the end of the day also have the responsibility to conduct due diligence on their investments.

“But, while the law certainly places limits on those advertisers, it also expects investors to act reasonably before basing their bets on the zeitgeist of the moment.”

However in his dismissal, Judge Fitzgerald acknowledged the power that celebrities have been afforded by new technologies and social media platforms in establishing potentially fraudulent promotional schemes.

“This action demonstrates that just about anyone with the technical skills and/ or connections can mint a new currency and create their own digital market overnight,” Fitzgerald reportedly wrote in his dismissal.

Celebrities now have the ability to “readily persuade millions of undiscerning followers to buy snake oil with unprecedented ease and reach,” he added.

But despite Judge Fitzgerald’s dismissal, the investor’s fight may not be over. Fitzgerald reportedly stated that he’d allow the plaintiffs to refile the lawsuit if the investor’s legal team amended a few provisions from its original filing, with the Judge making reference to the reciting of a provision under the Racketeer Influenced and Corrupt Organizations Act (RICO).

Kardashian has already been bitten once before over her promotion of EthereumMax on her social media account.

On Oct. 3, Kardashian reached a $1.26 million settlement with the U.S. Securities Exchange Commission (SEC) after allegedly failing to disclose her $250,000 paid promotion by the EthereumMax.

Mayweather's legal team has long denied any affiliation with the EthereumMax, with his Attorneys stating that the investor’s filing did not “identify a single statement made by Mayweather about eMax tokens or EthereumMax.”

class action

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