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The US bankruptcy regulatory has approved Terraform Labs’ applications to retain Dentons, a law firm despite various concerns raised by the SEC and the company’s creditors.
The US bankruptcy regulatory judge, Brendan Shannon has granted permission to Terraform Labs to hire Dentons for its legal representation. Since the initial of 2023, Terraform Labs has paid Dentons an overall $166 Million in legal fees which was opposed by the SEC as well as by Terraform’s creditors.
Regulatory Vs Terraform Labs
According to a report by Reuters, the US regulatory judge approved Terraform Labs’ request for hiring Dentons, a law firm for legal representation. This was done despite the matters raised by the company’s creditors and the SEC.
However, there is a big reason behind the regulatory approval. The crypto firm paid over $166 Million to the legal firm as legal fees and Dentons promised to return approximately $48 Million to Terraform.
According to the court document, the law firm will keep part of the remaining retainer to fund expenditures for a trial that will measure any fines the crypto firm must pay as an outcome of the SEC’s securities fraud suit against it.
Furthermore, the engagement of the law firm had stirred debate among different stakeholders, including regulatory bodies and Terraform’s creditors. Since 2023, the firm has totaled $166 Million for significant re-payment.
The payment diverted significant resources away from the creditors and bypassed the oversight of the bankruptcy court.
The promise of the Dentons aims to balance Terraform’s requirement for high-quality legal representation with the requirement to protect its dwindling financial resources for operational sustainability and creditor repayment.
As per the December report, the federal judge stated that Terraform Labs and its founder Do Kwon have violated the securities rules. As per the statement, the company failed to register its main businesses and collapsed LUNC and UST cryptocurrencies as securities offerings.
Collaboration With Kwon’s Lawyers
Terraform Labs filed for Chapter 11 bankruptcy in January and the co-founder was initially supposed to be present at the trial. As per the recent news, Kwon will most likely be deported to his home nation, South Korea.
Moreover, the collapse of LUNC and UST cryptocurrencies impacted on the crypto markets, leading to a $40 Billion decline. Also, the SEC’s claims against Terraform showcased the gravity of the allegations and the capable financial liabilities far exceeding the firm’s existing assets.
Nevertheless, despite the challenges and issues of legal defense and bankruptcy, the crypto firm somehow managed to address and resolve the bulk of the objections as per the latest court ruling.
A separate issue was raised by the US trustee, concerning Terraform Labs’ intentions for reimbursement of over $733,000 to Dentons. The entire situation showcases Do Know, the co-founder in Montenegro.
Furthermore, the defense team suggested that cooperation with Kwon’s Montenegrin lawyers would help in collecting essential information to create a strong defense strategy against the SEC.
Terraform Labs was established in 2018 by Do Kwon and Daniel Shin. It is a blockchain protocol and payment platform mainly used for algorithmic stablecoins. The platform was developed to enable the next generation of Web3 products and services.
With a background in journalism, Ritika Sharma has worked with many reputed media firms focusing on general news such as politics and crime. She joined The Coin Republic as a reporter for crypto, and found a great passion for cryptocurrency, Web3, NFTs and other digital assets. She spends a lot of time researching and delving deeper into these concepts around the clock, and is a strong advocate for women in STEM.
