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Terraform Labs Defends Against SEC's 'Government Overreach' 😡💥

Terraform Labs Defends Against SEC’s ‘Government Overreach’ 😡💥

Terraform Labs Defends $166 Million Retainer Payment in SEC Objection

Terraform Labs, the bankrupt crypto firm behind LUNA and TerraUSD (UST) cryptocurrencies, has responded to the U.S. Securities and Exchange Commission’s (SEC) objection to its $166 million retainer payment to law firm Dentons. In a court filing, Terraform Labs criticized the SEC’s objection as an example of government overreach, accusing the regulator of trying to disadvantage and distract them ahead of trial. The SEC had argued that Dentons should not be allowed to represent Terraform Labs and that the retainer payment could be used to repay creditors, potentially creating a conflict of interest. Terraform Labs is urging the court to overrule the SEC’s objections and approve its retainer payment.

Terraform Labs Counters SEC’s Objections

Terraform Labs has filed a court document defending its $166 million retainer payment to law firm Dentons against objections from the SEC. The bankrupt crypto firm argued that the SEC’s objection was an act of government overreach and intended to disadvantage them before trial. Terraform Labs maintained that the court should reject the objections and approve the retainer payment.

SEC Objects to Retainer Payment

The SEC raised concerns about Terraform Labs’ $166 million retainer payment to Dentons, arguing that it should not be allowed to hire the law firm or pay litigation costs during bankruptcy. The regulator claimed that this payment, made within 90 days prior to Terraform Labs’ bankruptcy filing, could be used to repay creditors and created a potential conflict of interest between the two firms. The SEC proposed blocking Dentons from representing Terraform Labs unless it returns $81 million from the retainer account and subjecting its fees to oversight from the bankruptcy court.

Terraform Labs Defends Payment Necessity

Terraform Labs justified its retainer payment by emphasizing the need to cover fees and expenses required to defend against pending litigation. The bankrupt crypto firm faces an upcoming civil enforcement action from the SEC and a grand jury investigation in the Southern District of New York. Terraform Labs argued that denying their ability to pay for necessary defense expenses would hinder their ability to operate and impede their right to due process.

Terraform Labs’ Background and Legal Troubles

Terraform Labs filed for voluntary Chapter 11 bankruptcy in Delaware after the collapse of its ecosystem, which led to contagion in the crypto industry. The firm’s founder, Do Kwon, is currently serving a jail sentence in Montenegro for using a forged passport. Upon his release, he faces extradition to the U.S., where the SEC has brought a civil fraud suit against him. Do Kwon also faces criminal charges from the SDNY attorney’s office.

Hot Take: Terraform Labs Fights Back Against SEC Objection

Terraform Labs is pushing back against the SEC’s objection to its $166 million retainer payment, arguing that it is necessary for their defense in pending litigations. The bankrupt crypto firm accuses the SEC of government overreach and attempts to disadvantage them before trial. While the outcome of this legal battle remains uncertain, it highlights the challenges faced by crypto companies when dealing with regulatory scrutiny and bankruptcy proceedings. As Terraform Labs fights to protect its interests, the implications for both the company and the broader crypto industry are significant. The resolution of this case will likely have far-reaching consequences for how regulators and crypto firms interact in future legal disputes.

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Terraform Labs Defends Against SEC's 'Government Overreach' 😡💥