You're thinking of Syntax Error, also called ]EE[, the original texture hacking team. The very day before they were supposed to release a patch for anyone to implement their textures (and some by Stack Smash members) into a copy of the game, Nintendo sent them a cease and desist order.
I think that's a load of bologna.
It's just too convenient for them for this to happen that day if they hadn't finished the patch or if something went wrong with it. And links to Stack Smash, Kitty Corp and Elite Smash Hackers were on their site. If Nintendo wanted to shut down texture hackers, why are we still here? And why did ]EE[ have to close entirely? Other fan projects (especially Chrono Trigger ones) have been ordered to stop, but they're allowed to still show what they've done.
Lie or not, it was a huge stupid day when that happened, full of drama and crap. Everyone who wanted Cloud, Mr. L and Rosalina rushed to Stack Smash to mourn (but they didn't forget to insult Stack Smash for no good reason). To take precautions, though (and especially because PZT, the highest-up, believes the story), Stack Smash will be moving to another server later. A server in Finland or Poland (I forget where). Wherever it is, copyright law is a little different, so even if the crazed whining Syntax Error fans do bring attention to people who want to sue, we'll be protected. The main hackers don't live in the United States anyway. But the whole project is nothing illegal in the first place. No money is made off of it, and the hacks are useless unless one has the ISO of the game (which would not be legal to download without paying--but none of the texture hacking projects are distributing it). This is all why the MOTHER 3 Fan Translation is also legal. In the end it'll encourage piracy, but doesn't it also encourage people to buy the game (from Nintendo, bigwigs with plenty of money who have gotten along just fine even with piracy going on for years)?
Summary for people who don't like reading: ]EE[ says they got an order from Nintendo to quit, I think it's a fat lie for many reasons, but we have nothing to worry about either way.
So my feelings are a mix between "I can't believe Syntax Error would lie like that" because I honestly don't believe Nintendo shut them down, and "That wouldn't even be fair" in the event sad ]EE[ fans who NEAD THIER CLAOWD STRIFE do get Nintendo's attention and they DO try to stop Stack Smash. But more than that I'm really happy about seeing my edits finally hexed and that they're coming out well. I want to be a game artist when I'm older, so this is good experience for me.