Terraform Labs Accuses SEC of ‘Unprincipled Strategy’
In a recent court filing, bankrupt cryptocurrency firm Terraform Labs has criticized the US Securities and Exchange Commission (SEC) for objecting to a $166 million retainer paid to law firm Dentons. The company argues that the SEC’s objection represents government overreach and aims to disadvantage and distract them before the upcoming trial.
Terraform Labs Contends SEC Has No Authority
Terraform Labs contends that if it hadn’t filed for Chapter 11 bankruptcy protection, the SEC would have no authority or insight into the company’s defense strategy or its decision to allocate funds for legal representation. However, the company claims that by taking advantage of the bankruptcy process, the SEC is allegedly using the situation to sabotage Terraform Labs’ defense in the SEC’s enforcement action.
Accusations of Damaging Actions and Questionable Behavior
The court filing by Terraform Labs accuses the SEC of engaging in damaging actions and questionable behavior in similar enforcement actions. The company asserts that the SEC’s objection continues an unprincipled strategy to gain a litigation advantage in a non-bankruptcy proceeding. Terraform Labs urges the court to reject the SEC’s attempt to use the Chapter 11 process for its own advantage and protect its right to defend itself in government litigation and investigations.
Concerns about Lack of Transparency
In addition, Terraform Labs claims that the SEC’s objection raises concerns about the lack of transparency regarding the allocation of funds. The company argues that the proposed litigation expenses do not benefit the estate and could harm it. The court filing disputes this claim, stating that the SEC’s objections misrepresent the facts. Terraform Labs clarifies that the maximum amount sought in the motion is $6,297,754.31, a fraction of the amount claimed by the SEC.
Request to Overrule SEC Objections
Terraform Labs further argues that the SEC’s objections fail to outweigh the evidence presented by its lead trial counsel, Mr. Califano. The company emphasizes that hindering these payments would impede their defense and unjustly advantage the SEC. Terraform Labs asserts that it has exercised its business judgment in seeking to make these payments, as they are essential for minimizing the SEC’s claim against the estate, maintaining employee morale, and retaining key personnel.
Justification Under Section 363(b) of Bankruptcy Code
The court filing argues that the payment of legal fees is justified under Section 363(b) of the Bankruptcy Code. Terraform Labs refutes the SEC’s assertion that the payment of fees to Terra co-founder Do Kwon’s Montenegrin counsel, the Rodic Law Firm, is inappropriate due to Do Kwon’s prior criminal conviction. The company urges the court to recognize its exercise of business judgment in seeking to pay the disputed expenses and requests the court to overrule the objections raised by the SEC and the US Trustee.
Implications for Terraform Labs’ Future
As the legal battle between Terraform Labs and the SEC intensifies, the court’s decision on the matter will have significant implications for the company’s future. It could potentially set a precedent for how government agencies can influence bankrupt firms’ legal defense strategies.
Hot Take: Terraform Labs Stands Up Against SEC’s Objection
In a recent court filing, bankrupt cryptocurrency firm Terraform Labs strongly criticized the US Securities and Exchange Commission (SEC) for objecting to a $166 million retainer paid to law firm Dentons. The company argues that the SEC’s objection represents government overreach and aims to disadvantage and distract them before the upcoming trial. Terraform Labs contends that if it hadn’t filed for Chapter 11 bankruptcy protection, the SEC would have no authority or insight into the company’s defense strategy or its decision to allocate funds for legal representation. By taking advantage of the bankruptcy process, the SEC is allegedly using the situation to sabotage Terraform Labs’ defense in the SEC’s enforcement action. The court filing accuses the SEC of engaging in damaging actions and questionable behavior in similar enforcement actions. Terraform Labs urges the court to reject the SEC’s attempt to use the Chapter 11 process for its own advantage and protect its right to defend itself in government litigation and investigations. The company also raises concerns about the lack of transparency regarding the allocation of funds and disputes the SEC’s objections, stating that they misrepresent the facts. Terraform Labs further argues that hindering the payment of legal fees would impede their defense and unjustly advantage the SEC. The company asserts that it has exercised its business judgment in seeking to make these payments, as they are essential for minimizing the SEC’s claim against the estate, maintaining employee morale, and retaining key personnel. The court filing justifies these payments under Section 363(b) of the Bankruptcy Code and refutes the SEC’s assertion that certain fees are inappropriate due to a co-founder’s prior criminal conviction. As this legal battle unfolds, the court’s decision will have significant implications for Terraform Labs’ future and may set a precedent for how government agencies can influence bankrupt firms’ legal defense strategies.
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