Terraform Labs, the company behind the collapsed cryptocurrency Luna, is embroiled in a new legal battle with the U.S. Securities and Exchange Commission (SEC) regarding its Chapter 11 bankruptcy case. The dispute centers on a $166 million payment Terraform Labs intends to use to retain Dentons U.S. LLC as its special counsel.
SEC Raises “Suspicious” Payment Concerns
The SEC last week objected to the hefty legal fee, raising concerns about the transfer of a portion of the funds to an “opaque slush fund.” The SEC claims this transfer was done deliberately to avoid paying any potential judgment from their enforcement action against Terraform Labs.
Terraform Labs Fights Back, Accuses SEC of “Overreach”
In a Monday filing submitted to a Delaware court, Terraform Labs vehemently denied the SEC’s accusations. They characterized the objections as “without merit” and called the SEC’s actions a “troubling example of government overreach.”
The company argues that the legal fees are crucial for defending itself against the SEC’s lawsuit and cooperating with the ongoing Department of Justice investigation. They further claim the SEC’s accusations are filled with “incorrect legal interpretations and false claims.”
Adding another layer of intrigue, Terraform Labs suggests the SEC’s true purpose is to distract them from focusing on their upcoming March 25th trial. This allegation highlights the tense relationship between the two parties involved.
Also Read: Terra Classic (LUNC) Surges Past $1 Billion Market Cap: A Look at the Factors Behind the Rally
Bankruptcy and Ongoing Legal Battles
Terraform Labs filed for Chapter 11 bankruptcy protection in January 2023, citing assets and liabilities between $100 million and $500 million. According to the company, this move allows them to appeal the SEC’s enforcement action.
The court’s decision regarding Terraform Labs’ ability to retain Dentons and the validity of the SEC’s claims remain to be seen. This legal battle adds another wrinkle to the ongoing saga surrounding Terraform Labs and the fallout from the Luna collapse.
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