SEC Raises Concerns Over TFL’s $166M Transfer
The U.S. Securities and Exchange Commission (SEC) has expressed concerns over Terraform Labs’ (TFL) transfer of $166 million to the Dentons Advance Payment Retainer. The SEC has described the amount as “suspicious” and believes that it may have been intended to evade settling a forthcoming judgment in the agency’s lawsuit.
- TFL transferred $166 million to the Dentons Advance Payment Retainer, with $122 million moved within 90 days before TFL filed for bankruptcy.
- The SEC is concerned that this transaction was meant to avoid settling a judgment in the agency’s lawsuit.
- The regulator considers the Dentons Advance Payment Retainer an “opaque slush fund” for legal fees, potentially used by TFL to prolong its legal dispute with the SEC.
- The SEC has asked the court to appoint a fee examiner to review the retainer payment and requested that Dentons not represent TFL unless the remaining funds are refunded.
The court hearing regarding this dispute is scheduled for March 5 in Wilmington, Delaware, with U.S. Bankruptcy Judge Brendan Shannon presiding.
Terraform Labs Chapter 11 Proceedings
Terraform Labs initiated Chapter 11 proceedings in January as it plans to appeal a December ruling favoring the SEC in a securities fraud case. The company and its founder, Do Kwon, were found to have violated U.S. law by failing to register two digital currencies that caused disruptions in cryptocurrency markets in 2022.
- TFL filed for Chapter 11 bankruptcy in order to appeal a ruling against them in a securities fraud case brought by the SEC.
- A federal judge found TFL and its founder guilty of breaching U.S. law by not registering two digital currencies.
- The extent of damages that TFL must pay is yet to be determined, but the company is concerned that it may exceed its assets.
After filing for bankruptcy, TFL sought approval from the court to engage Dentons as special litigation counsel and allocate $6.3 million for legal costs related to employees and external partners involved in litigation. Additionally, TFL plans to allocate approximately $3.25 million to cover employees’ legal expenses and $1.33 million for a lawsuit in the UK to gather evidence against the SEC’s lawsuit.
SEC Urges Court to Reject TFL’s Proposal
The SEC has urged the Delaware bankruptcy court to reject TFL’s proposal to retain Dentons U.S. LLC as its special counsel due to concerns over the amount paid and potential misuse of funds. The regulator argues that the Dentons Advance Payment Retainer could be used as a “war chest” to prolong TFL’s legal dispute with the SEC.
- The SEC has raised concerns about the amount paid to Dentons and believes it may have been intended to evade settling a forthcoming judgment in their lawsuit.
- The regulator considers the Dentons Advance Payment Retainer an “opaque slush fund” for legal fees that could be used by TFL to prolong its legal dispute with the SEC.
- The SEC has asked the court to appoint a fee examiner to scrutinize the retainer payment, which it deems suspicious in timing and amount.
- Dentons should not represent TFL unless the remaining retainer funds are refunded according to the SEC.
The court hearing regarding this dispute is scheduled for March 5 in Wilmington, Delaware, with U.S. Bankruptcy Judge Brendan Shannon presiding.
Hot Take: SEC Raises Concerns Over TFL’s Retainer Payment
The SEC has expressed concerns over Terraform Labs’ payment to Dentons U.S. LLC, describing it as “suspicious.” The regulator believes that this payment may have been made to avoid settling a forthcoming judgment in the agency’s lawsuit and considers the Dentons Advance Payment Retainer an “opaque slush fund” for legal fees. The SEC has urged the court to reject TFL’s proposal and appoint a fee examiner to scrutinize the retainer payment. The court hearing regarding this dispute is scheduled for March 5, and U.S. Bankruptcy Judge Brendan Shannon will preside over the arguments.
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