📣 SEC Bars Terraform Labs from Hiring Expensive Lawyers
posted 29 Feb 2024
The U.S. Securities and Exchange Commission (SEC) contends that bankrupt Terraform Labs should not be permitted to cover the costs of expensive legal representation for its employees.
Since early 2023, Terraform Labs has sent around $166 million to the Dentons law firm. The SEC suggests that these transfers could be an attempt by Terraform Labs to avoid paying a future judgment in the fraud case.
The amount Terraform is obliged to settle in damage compensation remains undecided, yet the firm anticipates that the figure could surpass its total assets.
Following its bankruptcy filing in January 2024, Terraform Labs sought court approval to appoint Dentons as a special legal advisor and to pay $6.3 million in legal fees for employees and partners similarly embroiled in legal challenges.
Furthermore, Terraform intends to allocate about $1.33 million towards legal actions in the UK, from which it hopes to acquire crucial evidence for its defense in the lawsuit against the SEC.
The SEC emphasizes that such "staggering" payments shall not be approved without stringent court supervision, as they decrease the transparency of Terraform's expenditures and might ultimately hinder the ability to compensate the affected investors and creditors of the company.
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