SEC Objects to $166 Million Terraform Legal Retainer, Alleges Fund Diversion from Investors

SEC Objects to $166 Million Terraform Legal Retainer, Alleges Fund Diversion from Investors

Crypto News – The U.S. Securities and Exchange Commission (SEC) has lodged objections against a $166 million retainer payment made to Terraform’s legal team, as reported by Reuters.

Furthermore, the SEC has asserted that Terraform should be barred from engaging the services of law firm Dentons or covering litigation expenses for its staff, as per the report.

The SEC contends that Terraform orchestrated the $166 million payment to Dentons as a means to evade potential future liabilities resulting from the SEC’s lawsuit.

Terraform Labs and its founder, Do Kwon, are currently embroiled in a legal battle with the SEC over the collapse of TerraUSD. In January 2024, Terraform Labs filed for Chapter 11 bankruptcy protection in Delaware following the demise of TerraUSD and the LUNA token in May 2022, causing significant losses for investors.

The SEC has accused Terraform of diverting funds into an undisclosed pool reserved for legal expenses, funds that could have otherwise been directed towards compensating investors and creditors amidst Terraform’s bankruptcy proceedings.

Neither Terraform Labs nor Dentons has immediately responded to requests for comment from CoinDesk.