SEC Raises Concerns Over Terraform Labs’ Payment to Lawyers
The United States Securities and Exchange Commission (SEC) has raised concerns over Terraform Labs’ payment of $166 million to the law firm Dentons. The SEC argues that the payment should not be allowed as a retainer during the trial, as it may be an attempt by Terraform Labs to avoid paying a future judgment in the ongoing lawsuit. The regulator suggests that the funds could instead be used to settle creditors and investors who have lost assets due to the company’s bankruptcy filing.
Terraform Labs’ Payments to Dentons
Terraform Labs has allegedly paid $166 million to Dentons as a retainer since 2023. Of this amount, $122 million was paid just 90 days before the company filed for bankruptcy. The SEC views these payments as an “opaque slush fund” that could be used as a war chest in the legal battle with the regulator. The SEC is concerned that such large payments to Dentons could undermine transparency and visibility into Terraform Labs’ spending.
SEC Suggests Funds Should be Used to Settle Investors
The SEC suggests that the $166 million payment to Dentons should instead be used to repay creditors and investors who have suffered losses due to Terraform Labs’ bankruptcy filing. The regulator argues that channelling the funds in this way would benefit investors and ensure greater oversight of the company’s spending. The SEC also raises concerns about potential conflicts of interest between Dentons and Terraform Labs regarding the distribution of funds.
Former CEO’s Legal Bills and Extradition
The SEC alleges that some of the funds in Dentons’ retainer account could be used to cover the legal bills of Terraform Labs’ former CEO, Do Kwon, in Montenegro. Both the US and South Korea are seeking Do Kwon’s extradition to face charges. A Montenegro judge has ruled in favor of the US, and Do Kwon’s trial is set to begin next month. The bankruptcy court in Delaware will address the dispute over the $166 million payment on March 5, while investors await the recovery of their losses.
Hot Take: SEC Questions Terraform Labs’ Payment to Lawyers
The SEC’s opposition to Terraform Labs’ $166 million payment to Dentons raises questions about the company’s spending and potential attempts to avoid future judgments. The regulator suggests that these funds should be used to settle creditors and investors who have been affected by the bankruptcy filing. This case highlights the importance of transparency and oversight in ensuring fair distribution of funds during legal proceedings. Investors will be closely watching the outcome of this dispute as they seek to recover their losses from Terraform Labs’ bankruptcy.
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