SEC accuses Terraform Labs of diverting $166 million to legal team ahead of court decisions

The US Securities and Exchange Commission (SEC) accused Terraform Labs of transferring astir $166 cardinal to Dentons U.S. LLC, a instrumentality firm, nether the guise of an Advance Retainer Payment. The SEC views this determination arsenic an effort to divert assets from the institution up of immoderate tribunal decision.

While the SEC acknowledges Dentons arsenic a ineligible counsel and recognizes the validity of covering litigation expenses, the regulator described the standard of the funds progressive successful the substance arsenic “extraordinary.”

The SEC claimed it took this enactment to safeguard the assets connected behalf of Terraform Lab’s victims owed to insufficient disclosures and non-compliance with bankruptcy regulations.

‘Suspicious transfers’

The fiscal regulator continued that Terraform Labs transferred $122 cardinal to Dentons wrong the 90-day model preceding its bankruptcy filing—a timing the SEC deems suspicious.

The committee alleged that these funds were funneled into an obscure money for the debtor’s ineligible squad to service arsenic a “war chest” to enactment its defense against the SEC to the detriment of its creditors.

The SEC further argued:

“The assets transferred whitethorn beryllium proceeds of the behaviour the SEC alleged, and the District Court already found, violated the law.”

While a important information of the outgo has been utilized to screen ineligible expenses, an outstanding equilibrium of $81 cardinal remains with Dentons. Consequently, the SEC has demanded the reimbursement of this remaining sum to Terraform Labs’ relationship earlier Dentons tin correspond them further.

In summation to seeking repayment, the SEC has urged the assignment of a interest examiner to scrutinize the exertion and associated payments.

Dentons besides represents Do Kwon.

The filing disclosed that Dentons besides represents Terraform’s erstwhile CEO, Do Kwon, who is presently embroiled successful ineligible troubles crossed respective borders.

Kwon is presently held successful Montenegro, wherever helium served a four-month situation condemnation for traveling with forged documents. Last week, a High Court approved his extradition to the US implicit his location country, South Korea. However, his extradition appears unlikely earlier his SEC trials statesman owed to ineligible complications.

Kwon’s issues with the SEC stem from allegations of misconduct surrounding the May 2022 Terra/Luna collapse. The SEC has accused Kwon and Terraform of misleading investors regarding the stableness of the failed TerraUSD algorithmic stablecoin.

The station SEC accuses Terraform Labs of diverting $166 cardinal to ineligible squad up of tribunal decisions appeared archetypal connected CryptoSlate.