SEC accuses Terraform Labs of $166M Dentons prepayment.

Ritu77

On February 29th, the U.S. Securities and Exchange Commission (SEC) expressed strong dissatisfaction with Terraform Labs for the recent prepayment of up to $166 million to the law firm Dentons. The SEC pointed out that Terraform Labs "transferred" this funding to the law firm's "opaque fund," believing that this cryptocurrency company, which has applied for bankruptcy, should not be allowed to hire Dentons and should not pay legal fees for its employees during the bankruptcy period.

Terraform Labs is the developer of the cryptocurrencies LUNA and TerraUSD (UST) and has voluntarily filed for Chapter 11 bankruptcy protection in Delaware. In documents submitted to the state bankruptcy court on January 21st, the company listed assets and liabilities ranging from $100 million to $500 million, with 100 to 199 creditors.

The SEC also noted that within the 90 days prior to the bankruptcy filing, Terraform Labs paid $122 million from its senior payment security deposit to Dentons, funds that could have been used to repay the company's creditors. This creates a potential conflict of interest between Terraform Labs and Dentons. The SEC stated that Dentons should not be allowed to represent Terraform Labs unless the law firm returns the remaining $81 million in the security deposit account, and its fees should be supervised by the bankruptcy court.

Terraform Labs has applied to the bankruptcy court for permission to hire special litigation counsel and requested the allocation of $6.3 million in legal fees to employees and external partners facing litigation. According to court documents, about $3.25 million will be used to pay employees' legal fees. Terraform Labs' bankruptcy filing aims to allow the company to continue executing its business plan in the legal proceedings against the SEC for securities fraud. Terraform Labs co-founder Do Kwon is currently in custody in Montenegro, awaiting extradition to the United States, facing civil fraud charges from the SEC and criminal charges from the U.S. Attorney's Office for the Southern District of New York.

977Iti

It's also very high.

Yamini003

This prepayment is quite substantial.

Jiger955

It's still a good idea to look at more information.