According to a Reuters report, the U.S. Securities and Exchange Commission (SEC) objected to a $166 million retainer payment to Terraform's lawyers.
Additionally, the commission said Terraform should not be allowed to outsource work to law firm Dentons or pay litigation costs for employees.
The SEC alleged that Terraform intended to avoid paying a potential judgment in ongoing litigation and therefore sent 166 million to Dentons.
Terraform Labs and its founder Do Kwon are currently facing an SEC lawsuit in the US regarding the collapse of TerraUSD. Terraform Labs filed a petition for Chapter 11 bankruptcy in January 2024 after TerraUSD and its LUNA token collapsed in May 2022, causing billions of dollars in losses to investors.
Terraform Labs and Dentons have not yet responded to CoinDesk's request for comment.