According to Reuters, the U.S. Securities and Exchange Commission (SEC) has expressed disapproval of a $166 million retainer payment made to Terraform’s attorneys.
Furthermore, the article stated that the SEC has stated that Terraform should not be permitted to retain the legal firm Dentons or cover employee litigation expenses.
The SEC claims that Terraform transferred $166 million to Dentons with the intention of avoiding having to pay a future judgement in the SEC’s complaint.
The SEC is presently suing Terraform Labs and its founder, Do Kwon, in the United States over the demise of TerraUSD. After billions of dollars’ worth of investor capital was destroyed in May 2022 by the collapse of the LUNA token and the failing stablecoin TerraUSD, Terraform Labs voluntarily filed for Chapter 11 bankruptcy in Delaware in January 2024.
The SEC said in the report that the funds were “syphoned” off into a “opaque slush fund for its lawyers,” when they could have gone to creditors and investors hoping to be paid back in Terraform’s bankruptcy.