SEC Challenges Terraform Labs’ $166 Million Payment to Law Firm

The SEC has approached the bankruptcy court to request that Terraform Labs be denied the use of the law firm Dentons as an advisor due to a “suspicious” payment. This was reported by The Block. 

According to the agency, Terraform Labs transferred a “staggering” $166 million into Dentons’ advance payment system. Of this total, $122 million was transferred within 90 days prior to the bankruptcy filing.

The SEC believes the company created an “opaque fund” to cover legal expenses in its dispute with the agency.

The Commission also suspects that the funds were used to pay the legal bills of former Terraform Labs CEO Do Kwon in Montenegro. The regulator’s lawyers noted that this case is unrelated to his work at the company.

SEC representatives have asked the court to appoint an audit committee to examine the “suspicious in amount and timing” advance payments.

In February, Montenegro made another decision to extradite Kwon to the United States, which the defense promised to challenge. The former CFO of Terraform Labs, Han Chang-Joon, who was arrested alongside him, was handed over to South Korean authorities at the beginning of the month.

Earlier, the New York prosecutor’s office charged Kwon with eight counts, including fraud and deceiving investors.