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According to a report by Reuters, the US Securities and Exchange Commission (SEC) has objected to the altcoin company Terraform Labs hiring the law firm Dentons for an astonishing fee of $166 million and paying for the lawsuit expenses of its employees, arguing that permission should not be granted for these actions. The SEC contends that the said fund was directed from a non-transparent bribery fund.
Terraform Labs’ Request Spurs SEC Action
Reuters reports that the SEC has objected to Terraform’s decision to retain the law firm Dentons for a substantial sum of $166 million. The US regulator also stated that the company should not be allowed to pay the lawsuit expenses for its employees. The SEC argues that it is wrong to direct this significant sum, which it emphasizes is quite high, to legal representation instead of transferring it to Terraform Labs’ aggrieved investors and creditors.
In addition to objecting to the payment of the specified fee for legal representation, the SEC also opposed Terraform Labs’ proposal to retain Dentons and cover lawsuit expenses for its employees. The US regulator’s objections come amid an ongoing legal battle against Terraform Labs and its founder Do Kwon following the collapse of TerraUSD, a leading stablecoin, and the LUNA token in May 2022.
Terraform Labs Recently Filed for Chapter 11 Bankruptcy
As is known, Terraform Labs filed for Chapter 11 bankruptcy in Delaware in January 2024, citing the failure of TerraUSD and LUNA as the catalyst for the collapse. This resulted in significant losses for investors.
According to the SEC, Terraform Labs’ allocation of $166 million to Dentons was a strategic move to avoid potential liabilities arising from the lawsuit. The SEC contends that the payment of a very high fee for legal representation essentially siphoned off a fund allocated to Terraform’s legal team, depriving investors and creditors of potential compensation during the company’s bankruptcy process.
The SEC’s objections are part of a regulatory review surrounding Terraform’s financial decisions and the allocation of funds during ongoing legal challenges and bankruptcy proceedings. Terraform Labs and Do Kwon face a serious legal process following the lawsuit filed by the SEC, and the future of the proceedings remains uncertain.
