The proposed format for the auction of its wireless-spectrum to be conducted by LightSquared Inc's has been deemed improper. According to a group of lenders, this may cause the bid from Dish Network Corp worth USD2.22 billion to be withdrawn.

The company headed by Philip Falcone is in the midst of bankruptcy and is now in the throes of fighting over the process of the sale of the company's assets after the objection that was filed in the Manhattan bankruptcy court. The main issue would be allowing Falcone's investment firm, Harbinger Capital Partners LLC to choose the winning bid. The lenders claim that Harbinger's previous opposition to any sale of LightSquared's assets would be detrimental to the bidding process.

The bid procedure was viewed as part of a 'scorched earth strategy' and also included a lawsuit filed against the global positioning system industry according to the lenders. The lawsuit, they claim, also violated bankruptcy rules. Since the GPS industry had not supported LightSquared's technology, thus the filing of a suit against them by LightSquared. 

The lenders consortium is holding USD1.4 billion of a total of USD1.7 billion in debt. It had proposed that LightSquared instead form an independent committee to oversee the auction or have an outsider trustee do the auction.