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. The plaintiff, Seven Peaks Ventures, invested in Prime Core Technologies, the parent company of crypto company Prime Trust, purchasing 700,000 shares in the Series A funding round, worth almost $2 million.
As reported by Law.com:
“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,” the Monday complaint read.
Seven Peaks argues that without Fenwick, the Series A sale wouldn’t have happened.
The complaint goes on to allege misleading information was provided to investors, specifically that Prime Trust did not have licenses to operate in 22 states. The filing says, “The consequences of Prime Trust’s operation in multiple states without a money transmitter license were significant. 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 Prime Trust didn’t collateralize the stablecoin, and that in 2021, they’d locked themselves out of the wallet holding $45 million, largely in Ethereum. And that wasn’t the end of the issues for the crypto company:
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 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 it didn’t have the minimum $1 million in stockholder equity to continue operations.
The complaint seeks more than $2.6 million in damages. Fenwick & West has not commented on the lawsuit.
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