Tilton, Patriarch Partners file counter-suit against SEC

Lynn Tilton: I am equity holder of all funds
Lynn Tilton: I am equity holder of all funds   

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.

Lynn Tilton, CEO of Patriach Partners.
Adam Jeffery | CNBC
Lynn Tilton, CEO of Patriach Partners.

The flamboyant Tilton, considered one of the richest women in America, told CNBC earlier this week that her battle with the SEC was one of "good and evil." She has denied the allegations, and vowed to continue running all 70 of the companies she owns.

Read MoreSEC accuses financier Lynn Tilton of fraud

Tilton said she hopeful that the case will be a success.

"I've had many David and Goliath battles, this is not my first one, and I have never had an adjudication against me because I fight for truth," Tilton said in the interview. "After five and a half years of investigation, unleashed subpoena power and one-sided testimony, not to give me a chance to have the means and the time to defend myself seems unfair and inequitable."

For Tilton's case to succeed, it would probably have to happen that the Supreme Court overturns a part of Dodd-Frank, which would be unlikely given prior precedent around administrative law judges, said John Coffee, a Columbia Law School professor and securities regulation expert.

"It might have some ability to get them a favorable settlement, but I don't think it has a good chance of succeeding in court," Coffee said in an interview with CNBC Wednesday.

CNBC staff and Reuters contributed to this report.