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Winston & Strawn LLP, one of the nation’s leading law firms, is pushing back against a $1.7 billion lawsuit filed by the bankruptcy trustee of GloriFi—a Texas-based banking startup that rose to prominence for its “anti-woke” branding and conservative appeal. The firm has asked the U.S. Bankruptcy Court for the Northern District of Texas to dismiss the claims, calling them baseless and legally defective.
The lawsuit, brought by trustee Scott M. Seidel, accuses Winston & Strawn and its Houston managing partner, Michael Blankenship, of professional negligence and breach of fiduciary duty. According to the complaint, the firm’s actions during GloriFi’s efforts to merge with a special-purpose acquisition company (SPAC) contributed to the company’s collapse and subsequent bankruptcy. The trustee is seeking to recover damages on behalf of the bankrupt estate, claiming the firm’s conduct cost GloriFi and its investors hundreds of millions of dollars in lost value.
Background: A Startup Built on “Anti-Woke” Ideals
GloriFi, officially known as With Purpose Inc., was founded with a mission to build a financial-services company catering to politically conservative customers. The startup marketed itself as a bank for those disenchanted with what they viewed as “woke” corporate culture in mainstream institutions. The company attracted significant media attention and investor interest, particularly from conservative circles that saw GloriFi as a cultural counterweight in the financial world.
By late 2021, GloriFi had ambitious plans to go public through a SPAC merger that could have valued the company at roughly $1.7 billion. To guide this process, the company retained Winston & Strawn and Blankenship, who had experience advising emerging companies on corporate transactions and regulatory compliance.
However, the startup’s trajectory quickly unraveled. Reports surfaced of internal conflicts, unfulfilled funding commitments, and operational mismanagement. Despite its early buzz, GloriFi failed to launch a sustainable banking platform and filed for Chapter 7 bankruptcy in February 2023.
The Lawsuit: Allegations of Malpractice and Breach of Duty
The trustee’s complaint alleges that Winston & Strawn and Blankenship played a key role in GloriFi’s downfall by providing poor legal advice and failing to prevent conflicts of interest among company insiders. The lawsuit claims the firm allowed certain executives and shareholders to make self-serving decisions that harmed the company, including questionable funding and governance moves during the SPAC merger process.
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According to the trustee, these alleged lapses deprived GloriFi of critical opportunities and undermined investor confidence, ultimately leading to the company’s implosion. The complaint seeks both compensatory damages and the recovery of roughly $800,000 in legal fees paid to the firm.
Winston & Strawn’s Response: “No Basis for Liability”
In its motion to dismiss, Winston & Strawn argues that the claims are legally insufficient and fail to identify any actionable misconduct. The firm contends that it fulfilled all of its professional duties and that GloriFi’s leadership—rather than its lawyers—made the business decisions that led to the company’s collapse.
The firm’s filing asserts that the trustee’s allegations “attempt to impose hindsight liability for business choices made by executives and investors,” adding that “a law firm is not a guarantor of its client’s success.” Winston & Strawn further argues that the complaint misrepresents the firm’s role in the proposed merger, noting that the transaction never closed and that any alleged damages tied to the deal are speculative.
Blankenship and the firm also maintain that they had no authority to override or second-guess the company’s strategic or financial decisions, emphasizing that doing so might itself have breached professional duties to respect client autonomy.
The Broader Legal and Business Context
The GloriFi case highlights the growing tension between politically branded startups and the high-stakes world of venture financing. GloriFi’s collapse became a cautionary tale for investors who back companies based on ideology rather than solid business fundamentals.
For law firms, the case underscores the potential liability risks in representing ambitious startups whose founders blur the line between political identity and business strategy. Winston & Strawn’s motion warns that accepting the trustee’s theory could expose lawyers to lawsuits whenever a client’s venture fails, even if the firm’s legal advice met professional standards.
Representation and Case Status
Winston & Strawn and Michael Blankenship are represented by O’Melveny & Myers LLP and Gibbs & Bruns LLP, while the bankruptcy trustee is represented by Iacuone McAllister Potter PLLC. The case is Seidel v. Winston & Strawn LLP, No. 25-03105, pending in the U.S. Bankruptcy Court for the Northern District of Texas.
As of now, the court has not ruled on the motion to dismiss. If the motion is denied, the case could move into discovery, potentially shedding light on the communications between GloriFi’s management and its legal counsel.
Implications for the Legal Industry
The outcome of this case may set an important precedent for law firms that advise high-risk or ideologically driven startups. If the court allows the lawsuit to proceed, it could signal increased scrutiny of how firms balance legal advice with business realities in politically charged ventures. Conversely, a dismissal would reinforce the traditional principle that attorneys are not liable for clients’ business failures absent clear evidence of negligence or misconduct.
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