Fenwick & West Sued Over Role as Counsel to Bankrupt Crypto Company Prime Trust

Earlier this week, a new lawsuit filed against Fenwick & West posits that the Biglaw firm’s role as attorney for a crypto client induced the plaintiff to invest.

A new lawsuit filed against Biglaw firm Fenwick & West alleges that the firm’s role as attorney for a crypto client led the plaintiff to make an investment in the company.

The plaintiff, Seven Peaks Ventures, claims that it invested in Prime Core Technologies, the parent company of crypto company Prime Trust, purchasing 700,000 shares in the Series A funding round, to the tune of almost $2 million.

According to Law.com, the Monday complaint alleges that “Fenwick’s public pronouncement of its venture capital and regulatory expertise contributed to the misleading notion that Prime took regulatory compliance seriously and lent credibility to Prime’s claims of compliance, competence, and innovation.”

Seven Peaks argues that the Series A sale would not have occurred without Fenwick.

The complaint also alleges that misleading information was provided to investors, specifically that Prime Trust did not have licenses to operate in 22 states.

“The consequences of Prime Trust’s operation in multiple states without a money transmitter license were significant,” the filing says. “Along with any regulatory penalty, state enforcement actions against Prime Trust eroded its reputation as a legitimate, well-run, regulatorily compliant operator.”

The lawsuit also alleges that Prime Trust did not collateralize the stablecoin, and that in 2021, they locked themselves out of the wallet containing $45 million, largely in Ethereum.

And that wasn’t the end of the crypto company’s troubles.

At the time of the June 2021 Series A round, Prime Trust said it had “crossed $100 million in annual revenue-run rate.” But by August 2023, the parent company, Prime Core, had filed for Chapter 11 bankruptcy in a Delaware district court.

This came shortly after the Nevada Department of Business and Industry placed Prime Trust into receivership after finding that it did not have the minimum $1 million in stockholder equity to continue operations.

The complaint seeks over $2.6 million in damages. Fenwick & West has not yet commented on the lawsuit.

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