The US SEC accuses Terraform Labs of paying a "staggering" prepayment of up to $166 million to a law firm.

According to BlockBeats news on February 29th, the US Securities and Exchange Commission (SEC) has expressed strong dissatisfaction with Terraform Labs' payment of up to $166 million to law firm Dentons. The SEC pointed out that Terraform Labs "transferred" this money to the law firm's "opaque fund" and believed that the bankrupt cryptocurrency company should not be allowed to hire Dentons or pay for its employees' legal fees during the bankruptcy period. Terraform Labs is the developer of the LUNA and TerraUSD (UST) cryptocurrencies and has voluntarily applied for Chapter 11 bankruptcy protection in Delaware. In documents submitted to the state bankruptcy court on January 21st, the company listed assets and liabilities of $100 million to $500 million and 100 to 199 creditors. The SEC also pointed out that within 90 days before the bankruptcy application, Terraform Labs paid $122 million to Dentons' senior payment guarantee deposit, which could have been used to repay the company's creditors. This created a potential conflict of interest between Terraform Labs and Dentons. The SEC stated that unless the law firm returns the remaining $81 million in the guarantee account, it should not be allowed to represent Terraform Labs, and its fees should be supervised by the bankruptcy court. Terraform Labs has applied to the bankruptcy court for permission to hire special litigation lawyers and requested that $6.3 million in legal fees be allocated to employees and external partners facing lawsuits. According to court documents, about $3.25 million will be used to pay for employees' legal fees. Terraform Labs' bankruptcy application aims to enable the company to continue its business plan in the legal proceedings facing the SEC's securities fraud case. Terraform Labs co-founder Do Kwon is currently serving a sentence in Montenegro and awaiting extradition to the United States to face civil fraud lawsuits by the SEC and criminal charges by the US Attorney's Office for the Southern District of New York.