Patriarch Partners and Lynn Tilton filed a counter-suit against the Securities and Exchange Commission on Wednesday, with the so-called "diva of distress" telling CNBC she was "baffled" by regulators' decision to file suit against Patriarch for breaching its fiduciary duty.
In an exclusive interview with CNBC, Tilton said the case against her is based on "financial statement technicalities," adding that the SEC had fundamentally misinterpreted the work of her advisory firm.
We have valued those carrying values as were disclosed to investors. "These are not market valuations, they are defined by the indentures as holding values or carrying values and we were consistent over the course of over a decade in the exact same manner as we are today," Tilton said on CNBC's "Power Lunch" Wednesday.
"What I've said is that the SEC mischaracterized the word valuation, and it's not a market valuation as one would appear to read from the complaint," she said, adding that the fight was like the Biblical story of "David versus Goliath."
Tilton is also arguing that the SEC's use of an administrative court is a violation of her constitutional rights. The regulatory maneuver prevents "due process rights available to litigants in the federal courts."
"Tilton and Patriarch strongly believe that the most fair and appropriate forum for this complex, five-year-old matter is U.S. District Court, and they urged the SEC Staff to bring their case in that forum," Tilton said in a statement earlier Wednesday.
U.S. regulators are accusing Patriarch of hiding the poor performance of loans underlying three collateralized loan obligations, adding that it was able to collect almost $200 million in fees by failing to properly value the assets in the funds through the methodology described to investors.