By CryptoNews - 3 months ago - Reading Time: 3 minutes
Terraform Labs Says Bankruptcy Protection Would Allow it Appeal against SEC’s Securities Fraud Lawsuit
Terraform Labs has said that its Chapter 11 bankruptcy protection filing would enable the pursuit of an appeal against the US Securities and Exchange Commission’s (SEC) securities fraud lawsuit.
In a recent filing, Terraform Labs CEO Chris Amani emphasized the importance of bankruptcy protection for the company’s operations and the preservation of value for stakeholders, including the Terra community.
“[The bankruptcy protection] is critical to the Debtor’s ability to operate as a going concern, preserve value for its creditors and stakeholders (including the Terra community), provide an orderly process for resolving competing claims against it, and pursue an appeal of the SEC Enforcement Action.”
The company filed for Chapter 11 bankruptcy in the U.S. Bankruptcy Court for the District of Delaware on January 21, citing estimated assets and liabilities between $100 million and $500 million.
The bankruptcy proceedings are set to begin with a hearing on Wednesday in the United States.
Terraform Would Face Liquidation Without Bankruptcy Protection
Amani explained that if Terraform Labs had to face a significant money judgment, it would likely be unable to satisfy the judgment or post the necessary bond for an appeal.
Without the protection of Chapter 11, liquidation would be a probable outcome after the trial and final judgment.
However, a successful appeal against the SEC’s claims could reduce Terraform Labs’ liabilities and potentially lead to positive financial outcomes for the company, its creditors, and the community.
The SEC charged Terraform Labs and its former CEO, Kwon Do-hyeong, with securities fraud in February 2023.
The commission alleged that the team orchestrated a “multi-billion dollar crypto asset securities fraud” while raising substantial funds from investors through the offering and sale of interconnected crypto asset securities, many of which were unregistered transactions.
Amani reiterated Terraform Labs’ disagreement with the District Court’s summary judgment decision and argued that the cryptocurrency tokens in question are not securities under the relevant Acts.
As a result, Amani contended that the SEC Enforcement Action falls outside the SEC’s jurisdiction.
In a prior ruling, Judge Jed Rakoff of the U.S. District Court for the Southern District of New York sided with the SEC’s claim that Terra offered unregistered securities in a summary judgment issued in December.
Do Kwon Awaits Extradition
Former Terra CEO Do Kwon, who was arrested in March of the previous year in Montenegro for attempting to travel with false documents, is currently awaiting extradition.
The SEC has been pursuing a civil case against Terraform Labs and Kwon, linking their operations to an alleged $40 billion cryptocurrency fraud.
Previously, the SEC agreed to postpone Kwon’s trial to mid-March due to Kwon’s extradition request.
Kwon’s legal team filed an appeal against the Montenegro High Court’s decision to uphold the extradition requests from both the United States and South Korea.
Moreover, Do Kwon’s legal representative in Montenegro Goran Rodic has presented an argument favoring Kwon’s extradition to South Korea over the United States.
Citing the European Convention on the Extradition of Criminals, the bilateral agreement between Montenegro and the United States, and local laws regarding international legal support, Rodic asserted that Kwon, being a Korean citizen, should be sent back to South Korea.
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Original source: CryptoNews