We’re not at liberty to discuss asset sources. This isn’t about playing coy either, our lawyers specifically warned us not to disclose such information until the legal briefs have been filed.
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The upside is giving back the TC community the money it’s owed and rightfully belongs to it.
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We’ll share all fund flows and final asset tallies once the legal briefs are filed. Can’t do that now because we still have to wait for the community to authorize us before we can move forward on their behalf. But like we mention in the proposal, everything will be 100% transparent.
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Same as above. The proposal needs to pass governance before we can officially move forward.
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Communication with the community will be handled transparently and whenever there’s news to share or a major milestone has been achieved. Our attorneys will handle the legal aspects, and are paid from the retainer. No extra reimbursement is necessary.
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This was actually covered in the proposal itself. The legal entity’s reach is strictly defined and outlined in the text. The mandate is also non-transferable.
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I see this as an even risk to win situation, only that the risk is taken by proposal authors and not by the chain. As there hasn´t been any other mature attempt of retrieving those assets or even localize them, I see this proposal as a yes for me. Not much to lose here. Only potential win for the chain.
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LEGAL PROCEEDINGS LENGTH:
a) We’ve been advised an estimated 3-9 months for the overall timeframe.
b) We’re committed to seeing this through, come what may. As mentioned in the prop, we’re ready to invest around $100,000 to fund the retrieval effort, up to some $150,000 at the extreme end. But the legal proceedings will be finished before we hit that point. We’re going in hot and fast, and want to retrieve that money for the community ASAP. That’s one of the reasons we can’t share the asset sources - we don’t want to tip them off.
LEGAL ENTITY:
a) Minimal financial burden once it’s set up and idling.
b) Yes, the community can lift the limitations enforced by this proposal for the legal entity. It’s only constrained because this prop puts guardrails on it.
c) That would be wasteful. Keep in mind there’s other retrieval efforts the community could pursue (ex: Risk Harbor clawbacks), and having a tailor-made legal entity on hand should significantly speed that up.
d) The legal entity dissolves if no funds are recovered because it has nothing to do, since in that case we’ve failed in our mission and haven’t secured any assets for the community.
TFL & LUNC CP:
a) LUNC is already on their radar. Has been for months now. They just haven’t sounded the bullhorns yet. Another reason why it’s a bad idea to delay asset retrieval.
b) Yes, the LUNC CP may be in danger of a court injunction due to ongoing proceedings against TFL. Which is why we were warned by our attorneys not to commingle retrieved assets with the chain’s CP. The Recovery Fund is a proposed workaround to ensure those assets remain safe and outside the legal risk zone. Nothing changes for the community tho, they’re still the beneficiaries of that money.
FINDER’S FEE / COSTS:
a) We can’t know how much money we’ll recover until the proceedings are finished.
b) Yes, it’s always an 80/20 split, regardless of final amount. This means we risk ending up in the red, as per your example.
2 Likes
Hello and foremost thank you for taking the time to draft this proposal and its intent. After further review would like some clarification on certain points you will read below👇
A. Formation of a Legal Entity & Due Diligence:
1-The proposal suggests forming a new legal entity. It’s crucial to define the exact type of entity (e.g., LLC, Non-profit Corporation, etc.) and ensure compliance with all relevant incorporation laws in the chosen jurisdiction.
2-Under the auspices of the proposal co-signers, this language is vague and doesn’t clearly define who controls the entity and their legal responsibilities. Who will be the members or shareholders? What are their fiduciary duties?
3-No specification of jurisdiction: Where will this legal entity be formed? Different jurisdictions have vastly different legal requirements, tax implications, and levels of scrutiny that would apply to the funds being discussed. Some Legal Principles & Examples (U.S.) are as follows:
*Corporate Veil Piercing: If the entity is not properly formed or is used to perpetrate fraud, a court in the U.S. could “pierce the corporate veil” and hold the co-signers personally liable for the entity’s actions.
4-Securities Law Violations: If the Terra Classic token is deemed a security by the SEC, activities related to the Recovery Fund could trigger U.S. securities laws. “This is undergoing litigation as we speak.”
B. Asset Recovery & Regulatory Compliance:
1-The proposal focuses on recovering “off-chain assets” but lacks specifics about the nature of these assets, their provenance, and the legal basis for claiming them.
2-There is a mention that “Assets that can potentially be proven to have belonged to the Terra Classic blockchain and its community" This statement is ambiguous. Proof of ownership is paramount. What evidence exists to support this claim? What legal claims will be pursued (e.g., constructive trust, unjust enrichment)?
3-Another mention is “Avoid regulatory breaches and ongoing entanglements with TFL": This acknowledgement indicates a potential awareness of legal risks. What specific regulatory breaches are anticipated? What due diligence has been done to assess the legal exposure?
4-While the proposal acknowledges KYC/AML compliance, it lacks specifics on how it will achieve this. Which KYC/AML standards will be followed? Which compliance experts will be consulted?
5-Also there is this mention “Demonstrate that the Terra Classic community… is the legitimate successor and beneficiary" This is a significant hurdle. What legal basis supports this claim? Is there a formal legal instrument (e.g., bankruptcy court order) that designates the community as the successor?
*Legal Principles & Examples (U.S.):
a) Asset Forfeiture Laws: If the assets are linked to illegal activities (even indirectly), they could be subject to forfeiture under U.S. federal or state laws.
b) Money Laundering Regulations: Transferring and managing assets, especially across borders, could trigger scrutiny under U.S. anti-money laundering (AML) laws. The Bank Secrecy Act requires financial institutions to report suspicious activity.
6-OFAC Sanctions: if the found assets relate in any way to bad actors (sanction entities), sanctioned countries or Specially Designated Nationals and Blocked Persons List this could be a problem.
7-Fraudulent Transfers: if the assets are being transferred by a company because of potential loss of money, the receiving entity may be exposed to liability.
D. Finder’s Fee & Transparency:
1-The 20% finder’s fee raises questions of fairness and potential conflicts of interest. Due to fact the community is unaware of who and by whom this funds will undergo litigation and most importantly who they belong to.
2-No independent valuation: How will the value of the recovered assets be determined? An independent valuation is crucial to ensure a fair finder’s fee.
3-Potential for self-dealing: The co-signers are both managing the recovery effort and receiving a percentage of the recovered assets. This creates a conflict of interest that needs to be addressed with strong transparency and oversight.
*Legal Principles & Examples (U.S.):
a) Fiduciary Duty: As managers of the Recovery Fund, the co-signers likely owe fiduciary duties to the Terra Classic community. This includes a duty of loyalty and a duty to act in the best interests of the community.
b) Unjust Enrichment: If the finder’s fee is deemed excessive, a court could find that the co-signers were unjustly enriched at the expense of the community.
E. Recovery Fund & Asset Distribution:
1-The proposal’s mechanism for the Recovery Fund is somewhat vague and introduces potential legal challenges. There is mentioning of “KYC’d chain representatives who volunteer for the duty” Who will conduct the KYC? What are the KYC standards? What legal liabilities will these volunteers assume? (This ties back to appendix B section 4)
2-Airdrops/grants to the TC community": How will these airdrops/grants be structured to comply with securities laws and tax regulations? What criteria will be used to determine eligibility?
3-Depending on proceedings outcome, it may be necessary to prove absence of TFL affiliation to satisfy regulatory compliance" again, this confirms potential regulatory entanglements with TFL.
*Legal Principles & Examples (U.S.):
a) Securities Laws: Airdrops could be considered securities offerings if they are deemed to have investment value. This could trigger registration requirements under U.S. securities laws.
b) Tax Implications: Airdrops and grants may be taxable income for recipients. The legal entity has a responsibility to comply with U.S. tax reporting requirements.
F- Assumption of Liabilities:
1-A significant risk exists that the formation of legal entity would assume any unknown liabilities associated with the Terra Classic Ecosystem.
2-Control over the TC Recovery Fund will be entrusted to KYC’d chain representatives who volunteer for the duty. This will be done under the watchful eyes of accredited attorneys." This statement does not exclude potential liabilities.
*Legal Principles & Examples (U.S.):
Successor Liability: Depending on the entity form, a risk exists that it could potentially assume any liabilities from defunct Terra ecosystem.
G. Recommendations based on this factors:
1-Conduct comprehensive legal due diligence. Engage experienced attorneys in the relevant jurisdictions to thoroughly investigate the assets, assess the legal risks, and ensure compliance with all applicable laws and regulations.
2-Structure the legal entity carefully: Choose the appropriate entity type, clearly define the roles and responsibilities of the members, and ensure compliance with corporate governance principles.
3-Establish a transparent process for asset valuation: Use an independent valuation firm to determine the fair market value of the recovered assets.
4-Implement robust KYC/AML procedures: Conduct thorough KYC on all individuals involved in the Recovery Fund and implement AML procedures to prevent money laundering.
5.-Obtain legal opinions on securities law compliance: Consult with securities law experts to ensure that the airdrops/grants do not trigger registration requirements.
6-Draft clear and comprehensive legal agreements: All agreements related to the asset recovery, finder’s fee, and asset distribution should be in writing and reviewed by legal counsel.
Regarding Potential Difficulties & Legal Obstacles and "Guardrails & Guarantees. This information provides additional context but also introduces more legal concerns read below 
H. Analysis of "Potential Difficulties & Legal Obstacles:
1-This section demonstrates an awareness of the inherent legal and logistical challenges. Recognizing the complexity of cross-border asset recovery, jurisdictional issues, and potential institutional resistance is crucial for realistic planning. It’s Weaknesses may be read in text; ”Demonstrate that the Terra Classic community… is the legitimate successor and beneficiary. This is a significant hurdle. What legal basis supports this claim? Is there a formal legal instrument (e.g., bankruptcy court order) that designates the community as the successor?
2-Underestimation of Costs: The proposal mentions committing upwards of $100,000. Depending on the complexity and jurisdictions involved, this could be a significant underestimation. Litigation can be incredibly expensive especially with the amount of funds under litigation.
I. Guardrails & Guarantees:
1-This section attempts to provide assurances of transparency and accountability with a formal audit of all retrieved fund flows. Who will conduct the audit? What standards will be used? Will the audit be made public? It is important to engage a third party auditor that does not have any affiliation with anyone involved to avoid any conflict of interest or any legality that might be encountered at a later time.
2-It mentioned “Terra Classic’s community is indemnified and shielded by the legal entity" While this is intended to provide comfort, it’s important to understand the limitations of this indemnification and what it consists of. Indemnification is only as good as the entity providing it, and if the legal entity has limited assets, the indemnification may be of little practical value.
3-Terms will be formalized in a full Legal Agency Agreement: This is crucial, but the devil is in the details. The Agency Agreement must be carefully drafted to protect the interests of the Terra Classic community and its people.
J. Irrevocable and exclusive mandate:
1-This is a major red flag. Granting an “irrevocable” mandate is highly unusual and potentially unwise. It significantly limits the community’s ability to respond to unforeseen circumstances or if the co-signers are not performing as expected. Courts are often reluctant to enforce “irrevocable” provisions, especially where there is a significant power imbalance. It is mentioned that “This mandate shall not be subject to reversal, revocation, or further governance votes” A court will be unlikely to enforce any provisions regarding no “reversal, revocation, or further governance votes”. This provision is unenforceable.
2-Another important mention on this proposal Is the following statement; “Put simply: this governance proposal is legally binding for both sides" This statement is overly simplistic and potentially misleading. The enforceability of the governance proposal as a legally binding contract is questionable, especially considering the decentralized nature of the community and the lack of traditional contractual elements (e.g., clear offer, acceptance, and consideration).
Key Legal Concerns & Recommendations Based on the Additional Information:
a) The "Irrevocable Mandate: This provision is highly problematic and should be reconsidered. The community needs to retain the ability to terminate the mandate if necessary. Instead of an irrevocable mandate, consider a contract with performance-based milestones and clear termination clauses.
b) Agency Agreement: The Legal Agency Agreement is critical. It should be drafted by independent counsel representing the Terra Classic community and should address the following:
c) Scope of Authority: Clearly define the scope of the co-signers’ authority and any limitations.
d) Performance Metrics: Establish specific performance metrics that the co-signers must meet.
e) Termination Clauses: Include clear and reasonable termination clauses that allow the community to terminate the agreement for cause or without cause.
f) Conflict of Interest Provisions: Address the potential conflicts of interest related to the finder’s fee and ensure that the co-signers act in the best interests of the community.
g) Reporting Requirements: Specify the frequency and content of reports that the co-signers must provide to the community.
h) Indemnification and Insurance: Ensure that the legal entity has adequate insurance coverage to cover potential liabilities and that the indemnification provisions are reasonable and enforceable.
i) Dispute Resolution: Establish a clear dispute resolution mechanism, such as arbitration.
j) Clarity on Asset Ownership: Thoroughly investigate and document the legal basis for claiming ownership of the off-chain assets. This will be crucial for navigating potential legal challenges.
k) Escrow Account: Consider using an independent escrow agent to hold the recovered funds until the distribution plan is finalized and approved by all stakeholders.
l) Legal Review by Independent Counsel: The Terra Classic community should engage independent legal counsel to review the entire proposal and the Legal Agency Agreement before proceeding. This counsel should represent the community’s interests and ensure that the agreement is fair and enforceable.
Overall Assessment:
The proposal has the potential to benefit the Terra Classic community, but it also carries significant legal risks. The “irrevocable mandate” is a major red flag that needs to be addressed. By addressing these concerns and implementing the recommendations outlined above, the community can mitigate the risks and increase the likelihood of a successful outcome.
3 Likes
I think this is an excellent initiative, that Terra Classic desperately needs. I really hope it succeeds. Please note that this is my personal opinion and not necessarily that of Hexxagon (it has yet to be discussed within the team).
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On their radar in what way and what would “sounding the bullhorns” look like? Can you specify if this is speculative or there is some evidence/first hand knowledge?
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If you’ve been advised by legal council to keep any retrieved assets separate from the CP, which could be in danger of court injunction, does your legal team have any suggestion on how to safeguard funds currently in the CP?
Can you elaborate on why they feel these CP funds are in danger and how they could possibly be tied to TFL legal issues? I was of the understanding that all TFL assets pertaining to the ongoing legal issues have been seized. Isn’t the fact that no one has come for any funds on terra classic an indicator that they do not believe these funds can legally be confiscated or otherwise locked up?
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I understand that, but you stated that if you are correct, the community stands to gain north of $1.5 million and I’m asking if that is your gross estimation which the 20% will be deducted from or if the number is higher than that and so deducting, the 20% finders fee would still net the community $1.5 million. I understand that this is all speculative, I’m just looking for clarification on your statement here to get some idea of a potential top number that you have so far identified as potentially recoverable.
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If the injunction were to materialise, who would it name as the person(s) or entity (entities) subject to the injunction? My understanding is that in general US law requires injunctions to specifically name those who are subject to them…
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Just for the record I’d like to say that I don’t mind you using AI to help you write your response here, since as you mentioned English isn’t your first language… however a lot of points you’ve raised in your post have already been covered within the proposal itself, and often in the very sections you quoted. The proposal simply asks for the community’s approval to begin recovery efforts at our own expense, with legal oversight, full KYC, and complete transparency. There is zero financial or legal risk to the community. No funds are requested, and if no assets are recovered, no payment is made. The structure is performance based and fully aligned with the community’s interests. Everything is clearly laid out in the proposal in plain terms.
I will answer your questions in greater detail below…
A. Formation of a Legal Entity & Due Diligence
“The proposal suggests forming a new legal entity. It’s crucial to define the exact type of entity (e.g., LLC, Non-profit Corporation, etc.) and ensure compliance with all relevant incorporation laws in the chosen jurisdiction.”
Proposal quote (Section 3):
“Establish a legal entity under the auspices of the proposal co-signers to represent the Terra Classic stakeholders in legal and financial matters related to asset recovery.”
The proposal seeks governance approval to initiate the process of forming the entity. Final structure (LLC, nonprofit, etc.) and jurisdiction will be selected after approval, based on guidance from licensed legal counsel. This sequencing is intentional and necessary to avoid premature legal and financial exposure.
“Under the auspices of the proposal co-signers, this language is vague and doesn’t clearly define who controls the entity and their legal responsibilities.”
Proposal quote (Section 3):
“Control over the TC Recovery Fund will be entrusted to KYC’d chain representatives who volunteer for the duty. This will be done under the watchful eyes of accredited attorneys.”
“Upon successful completion of its task, the legal entity will be handed over to the Terra Classic community for future use, and can be staffed via governance votes.”
Control is fully defined. The co-signers will manage the entity only for the recovery phase, and the proposal explicitly mandates transfer of control to KYC’d community members and/or selected by governance. This is not vague, it’s built in community ownership with compliance guardrails.
“No specification of jurisdiction… Some legal principles & examples (U.S.): Corporate Veil Piercing…”
Proposal quote (Section 5(iii)):
“The authors of this proposal are prepared to commit upwards of $100,000 in out-of-pocket legal and administrative expenses, including but not limited to: engagement of professional attorneys…”
Jurisdiction will be selected by attorneys based on the best structure for cross-border compliance. The concern about veil piercing is addressed by having a properly formed entity with legal oversight which is exactly what the proposal outlines. Our legal team is also there to handle the finer details as needed.
“Securities Law Violations: If the Terra Classic token is deemed a security by the SEC…”
Proposal quote (Section 5(v)):
“Final asset disbursement will be made pursuant to legal mandates. Depending on proceedings outcome, it may be necessary to prove absence of TFL affiliation to satisfy regulatory compliance.”
Also (Section 3):
“…to avoid regulatory breaches and ongoing entanglements…”
The proposal recognizes this legal exposure and explicitly plans to avoid it. The entire structure is built on ensuring no overlap with TFL, as well as compliance with securities laws, and adherence to regulatory mandates. Again, this is all explained in the proposal, in plain language to make it easy to understand and avoid any potential confusion.
B. Asset Recovery & Regulatory Compliance
“The proposal focuses on recovering ‘off-chain assets’ but lacks specifics about the nature of these assets, their provenance, and the legal basis for claiming them.”
Proposal quote (Section 4(ii)):
“The focus is on pursuing real, tangible, legally substantiated and recoverable funds, grounded in ownership records, transactional evidence, and historical documentation.”
The assets are based on traceable, documented sources. Details are withheld intentionally to avoid compromising legal efforts, a point made in the Q&A section.
“There is a mention that ‘Assets that can potentially be proven…’ This statement is ambiguous. Proof of ownership is paramount.”
Proposal quote (Section 2):
“…off-chain assets that could be legally proven to have belonged to the Terra Classic ecosystem.”
Also (Section 4(ii)):
“…grounded in ownership records, transactional evidence, and historical documentation.”
“Potentially” reflects appropriate legal caution. Ownership proof will be presented as part of legal proceedings, not via a public proposal. This is standard in legal recovery efforts.
“‘Avoid regulatory breaches and ongoing entanglements with TFL’: This acknowledgement indicates potential legal risk.”
Proposal quote (Section 5(v)):
“…critically important for the Terra Classic community to legally distance itself from Kwon Do-Hyung and Terraform Labs…”
This is a protective measure, not an admission of liability. It’s essential to recover funds cleanly, without regulatory obstruction.
“The proposal lacks specifics on how it will achieve KYC/AML compliance.”
Proposal quote (Section 3):
“The co-signers will be fully KYC’d to the relevant authorities and jurisdictions…”
“Control over the TC Recovery Fund will be entrusted to KYC’d chain representatives…”
KYC/AML compliance is built in at both the legal and community levels, and will be executed through licensed counsel.
“Demonstrate that the Terra Classic community… is the legitimate successor…”
Proposal quote (Section 5(i)):
“Demonstrate that the Terra Classic community (via its governance approval and backing) is the legitimate successor and beneficiary of the funds in question.”
That’s what the legal entity and attorneys are for, this is a job for a court, not a forum post. Governance approval is the first step.
“If the assets are linked to illegal activities… they could be subject to forfeiture under U.S. federal or state laws.”
Proposal quote (Section 5(ii)):
“Engagement of professional attorneys… compliance consultations and documentation fees…”
Also (Q&A):
“We will comply with all relevant laws and custodial procedures. All transactions will be auditable.”
Nothing will be pursued if it violates forfeiture laws or AML frameworks. Our legal team is there to ensure we’re fully compliant with the law.
D. Finder’s Fee & Transparency
“The 20% finder’s fee raises questions of fairness…”
Proposal quote (Section 1):
“The co-signers will not be requesting any money from LUNC’s Community Pool, but will instead be paid a 20% finder’s fee on all assets they manage to retrieve.”
Also (Section 6):
“Only if recovery is achieved will a 20% success fee be paid… If there is no recovery, no fee is due.”
There is no upfront cost to the community and no reimbursement for failed attempts. This model shifts all financial risk to the us, as the co-signers. Importantly, a 20% success fee is significantly below standard industry contingency rates, which often fall in the 30–40% range in legal recoveries. I’d also like to remind you that the chain would be getting $0 without us pursuing these funds. So any talk of “fairness” regarding the finder’s fee is moot, because not only are we risking $100,000 upfront, we’ve also spent months figuring out a way to bring that money back to the TC community.
“No independent valuation: How will the value of recovered assets be determined?”
Proposal quote (Q&A):
“The 80/20 split will apply to the net amount received after any legally required deductions…”
The valuation is inherently tied to actual recovery, not theoretical or self appraised figures. This means that the finder’s fee is only applied to verifiable, receipted, and legally confirmed funds. The proposal clearly states that asset disbursement following proceedings closure will be overseen by regulators and/or government entities. Or put simply: it’ll be pretty clear how much money we’ve secured and brought to the TC community, there’s no ambiguity about it.
“The co-signers are both managing the recovery effort and receiving a percentage… This creates a conflict of interest…”
Proposal quote (Q&A):
“We will not be in personal possession of community assets — money retrieved… will be forwarded to the Recovery Fund.”
Also (Section 6):
“Fiduciary duties (we must act in the best interest of the community at all times).”
All assets will flow through a legally defined structure, overseen by KYC’d representatives and subject to formal audits. This ensures clear separation between recovery efforts and fund control, eliminating self dealing and guaranteeing oversight and transparency throughout the process. Again, all of this is mentioned in the proposal itself, repeatedly.
E. Recovery Fund & Distribution
“Who will conduct the KYC? What are the KYC standards?”
Proposal quote (Section 3):
“Control… entrusted to KYC’d chain representatives who volunteer for the duty. This will be done under the watchful eyes of accredited attorneys.”
KYC will follow the standards of licensed legal counsel in the relevant jurisdiction.
“How will airdrops/grants be structured to comply with securities laws and tax regulations?”
Proposal quote (Section 5(v)):
“Final asset disbursement will be made pursuant to legal mandates.”
Any disbursement will comply with local law meaning no assets move without legal clearance.
“This confirms potential regulatory entanglements with TFL…”
Proposal quote (Section 5(v)):
“…prove absence of TFL affiliation to satisfy regulatory compliance.”
That’s the point. To avoid regulatory entanglements by distancing from TFL.
F. Assumption of Liabilities
“A significant risk exists that the legal entity would assume any unknown liabilities…”
Proposal quote (Section 3):
“This entity… will have no control or claim over the current Terra Classic blockchain, will not influence its governance…”
This entity acts externally. It is formed to protect the community, not inherit liabilities from the chain.
G. Recommendations Based on Legal Risks
Each of your six recommendations is already included, explicitly or by function in the proposal:
• Legal due diligence? Already happening.
• Appropriate entity structure? Confirmed in Section 3.
• Valuation process? Transparent and community controlled post recovery.
• KYC/AML? Required for all participants.
• Securities/tax law? Handled by attorneys before disbursement.
• Legal agreements? Mandated in Section 6.
H. Potential Difficulties & Legal Obstacles
“What legal basis supports this claim? Is there a formal legal instrument…”
Proposal quote (Section 5(i)):
“Demonstrate that the Terra Classic community (via its governance approval and backing) is the legitimate successor…”
This is why the proposal exists, to establish legal standing via governance.
“This could be a significant underestimation…”
Proposal quote (Q&A):
“We estimate the overall legal expenditure will fall somewhere between $75,000–150,000…”
The co-signers take that risk. The community doesn’t.
I. Guardrails & Guarantees
“Who will conduct the audit?”
Proposal quote (Section 6):
“Formal audit of all retrieved fund flows”
Also (Q&A):
“Audit trails and final reports will be shared publicly.”
Audits are part of the final reporting process, under legal oversight.
“Indemnification is only as good as the entity providing it.”
Proposal quote (Section 6):
“Terra Classic’s community is indemnified and shielded by the legal entity…”
Yes, the Terra Classic stakeholders are shielded by the legal entity during this process, because they have 0 liability in these proceedings. But this is limited to just our particular retrieval effort, as is everything outlined within the proposal. We’re not looking to control the chain nor influence it, just to retrieve assets for the TC community & stakeholders.
“The Agency Agreement must be carefully drafted…”
Proposal quote (Section 6):
“These terms will be formalized in a full Legal Agency Agreement…”
This is not optional, it’s required before any action is taken.This agreement is being developed with licensed counsel and will include clear definitions of scope, fiduciary obligations, reporting requirements, performance expectations and legal safeguards.
J. Irrevocable Mandate & Binding Language
“Granting an ‘irrevocable’ mandate is highly unusual…”
Proposal quote (Section 6):
“This mandate shall not be subject to reversal… as such actions would interfere with legal standing…”
This isn’t a red flag, it’s a necessary legal safeguard. Once filings are made, revoking the mandate could undermine standing or derail the case. The clause ensures continuity during legal proceedings, not indefinite control.
The mandate applies strictly to the asset recovery process. Not chain governance, spending, or long-term control. Its scope is limited, and timed to the legal proceedings.
“The enforceability… is questionable…”
Proposal quote (Section 6):
“Put simply: this governance proposal is legally binding for both sides…”
Clarified in Q&A:
“This refers to the Legal Agency Agreement…”
The vote grants authority. The legal agreement executes it. Our legal team confirm that the proposal is binding once it passes governance.
“Key Legal Concerns & Recommendations Based on the Additional Information:”
a) Irrevocable Mandate:
This clause is narrowly scoped and exists only to preserve legal continuity once proceedings begin. It prevents governance from unintentionally invalidating filings mid process. It is not for indefinite control, the mandate ends when funds are recovered.
b) Legal Agency Agreement:
Already committed to in the proposal:
“These terms will be formalized in a full Legal Agency Agreement…”
This agreement will be professionally drafted under guidance from retained legal counsel.
c) Scope of Authority:
The scope is strictly limited to recovery and ends once funds are transferred to the Recovery Fund.
d) Performance Metrics:
The success metric is binary: either recover funds or don’t. The 20% fee is tied to successful recovery. No success = no compensation.
e) Termination Clauses:
These are embedded in the Legal Agency Agreement, including a sunset clause. This is not an open-ended mandate.
f) Conflict of Interest:
Fiduciary duties are baked in:
“We must act in the best interest of the community at all times.”
Funds are never in our personal possession. Everything is handled through legal channels and verifiable third party custody.
g) Reporting Requirements:
Audits and final reports are promised:
“Formal audit of all retrieved fund flows… shared publicly.”
Public accountability is integral to the plan.
h) Indemnification & Insurance:
“Terra Classic’s community is indemnified and shielded by the legal entity.”
It’s not necessary at this stage because the community assumes no liability, but if it becomes a requirement, we’ll follow counsel’s advice.
i) Dispute Resolution:
Handled within the Legal Agency Agreement framework.
j) Asset Ownership Clarity:
Legal recovery is based on documented facts, not speculation. All claims must be backed by verifiable records.
k) Escrow Option:
While escrow isn’t mentioned by name, the funds will be controlled by a community elected KYC’d entity operating outside of TFL entanglements. If the community wishes to add escrow post recovery, that’s fully within their mandate.
l) Legal Review by Independent Counsel:
Yes, this would fall under the community’s discretion and is outside the scope of this proposal.
Just to quickly summarize one last time:
- There is zero legal or financial risk to the Terra Classic community.
- The proposal requires no funding from the community, regardless of outcome.
- It introduces only the potential to recover significant assets.
Thank you for your time.
1 Like
LUNC as a chain isn’t entirely separated from TFL. With ongoing legal cases against Terraform Labs and Do Kwon, there’s a non-trivial risk that the chain’s assets could potentially get caught up in enforcement or bankruptcy proceedings. Key word being ‘could’ - no one knows for sure until it happens. We were advised to avoid delaying recovery efforts, as well as avoid commingling retrieved assets with LUNC’s Community Pool.
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No suggestions as how to safeguard LUNC CP funds, we were just warned to avoid commingling with CP funds at all costs. You’re right that TFL assets have been seized, but the LUNC CP (same as the Luna 2.0 CP) is still technically tied to TFL, and thus isn’t outside the potential legal dragnet. These are all hypotheticals, but there’s enough of a risk associated with them that our attorneys warned us to set up a fresh Recovery Fund which has a clean slate and exists for the sole benefit of the TC community. That way there’s legal separation - a sort of moat, if you will. Just to clear, we’re not claiming the LUNC CP is under immediate threat. But we were strongly advised that mixing recovered funds into it could create issues later, especially if regulators or courts decide to revisit TFL linked structures.
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The 20% finder’s fee will be deducted from the $1.500,000 if we manage to secure it… or however much we retrieve. Hopefully we’ll manage to secure enough that the community is left with a million or more after our finder’s fee, but obviously we can’t guarantee that, it’s all speculative at this point. Could be a lot less, depending on how things go. Overall it’s better that we underpromise and overdeliver, than vice versa.
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That would depend on the prosecutors and what (who) they go after. We didn’t spend too much time discussing that with our legal team, because the focus was more on the Recovery Fund and sorting out the plan of action for going after the asset sources we’d located.
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Gotcha.. so with that in mind, is it safe to assume that the $1.5 million is a lesser amount than the actual amount, potentially recoverable? Am I to derive from your answer that you are certainly under promising? 
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A fair question, but no, we wouldn’t say that with certainty. The $1.5 million is based on what we believe is realistically recoverable, however we are looking at ways that we may be able to increase that… but obviously that is no easy task and not guaranteed, it’s an uphill battle. We just have to see how this pans out and try to recover what we can.
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In my opinion, if there was an injunction it would name TFL people to ensure they would not benefit from the Terra Classic CP (under penalty of contempt of court if they broke the injunction).
I highly doubt the court would attempt to prevent normal blockchain operations/CP disbursements.
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We were advised it’s better to be cautious due to possible association, and not intermingle the funds.
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