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US Judge Approves Terraform Labs to Hire Dentons for Legal Representation
US Judge Brendan Shannon has granted bankrupt crypto company Terraform Labs permission to hire Dentons for its legal representation. Shannon approved the hiring at a bankruptcy court hearing in Wilmington, Delaware after deeming Terraform’s legal spending as a necessary and appropriate use of the company’s financial resources.
Legal Fees Controversy
Since the beginning of 2023, Terraform Labs has paid Dentons a total of $166 million in legal fees. This move was previously opposed by the SEC and Terraform’s creditors, who argued that it diverted money away from them. To address these concerns, Dentons agreed to return $48 million to Terraform and agreed to greater oversight by the bankruptcy court for its future legal work.
Upcoming Trial and Penalties
Court documents indicate that Dentons will retain part of the remaining retainer to cover expenses for a trial that will determine any penalties Terraform must pay due to the SEC’s securities fraud suit against it.
Terraform’s Legal Challenges
Dentons faces challenges not only in defending Terraform but also in navigating other lawsuits involving crypto companies and regulators. The SEC is currently pursuing several companies for alleged securities fraud, including Ripple, Coinbase, and Binance.
SEC Ruling and Impact
In December, a federal Judge ruled that Terraform Labs and its founder Do Kwon violated U.S. securities laws by not registering its main businesses, the now-collapsed UST and LUNA (LUNC) cryptocurrencies, as securities offerings. LUNC is a renamed version of the original LUNA, which played a crucial role in pegging Terra’s flagship cryptocurrency, UST, to the US dollar.
The collapse of UST had significant repercussions for the industry, leading to a recession and bankruptcy filings from companies within Terra’s ecosystem, such as Celsius, Voyage, Vauld, FTX, and Three Arrows Capital (3AC). The SEC estimates that Terraform’s ecosystem collapse resulted in $40 billion in damages.
Ian is a cryptocurrency enthusiast blending humor with professionalism. With an engineering background and a storyteller's heart, he simplifies the blockchain world with sharp analysis and a touch of wit. At Cryptowire, he brings his unique perspective to make digital financial innovation accessible to all.
