Terraform Labs Files for Bankruptcy to Pursue Appeal Against SEC Lawsuit
Terraform Labs, the company facing a securities fraud lawsuit from the US Securities and Exchange Commission (SEC), has filed for Chapter 11 bankruptcy protection. The CEO, Chris Amani, stated that this move is crucial for the company’s operations, preserving value for stakeholders, and enabling an appeal against the SEC Enforcement Action. The bankruptcy filing was made in the U.S. Bankruptcy Court for the District of Delaware, with estimated assets and liabilities between $100 million and $500 million.
Bankruptcy Protection Prevents Liquidation
Amani explained that without bankruptcy protection, Terraform Labs would likely be unable to satisfy a significant money judgment or post the necessary bond for an appeal. Liquidation would be a probable outcome without Chapter 11 protection. However, if the appeal against the SEC’s claims is successful, it could reduce liabilities and lead to positive financial outcomes for the company, creditors, and community.
SEC Charges Terraform Labs with Securities Fraud
The SEC charged Terraform Labs and its former CEO, Kwon Do-hyeong, with securities fraud in relation to a “multi-billion dollar crypto asset securities fraud” scheme. The commission alleged that they raised substantial funds through unregistered transactions. Amani disagrees with the District Court’s summary judgment decision and argues that the cryptocurrency tokens involved are not securities under relevant Acts.
Former CEO Do Kwon Awaits Extradition
Former Terra CEO Do Kwon is currently awaiting extradition after being arrested in Montenegro for attempting to travel with false documents. The SEC has been pursuing a civil case against Terraform Labs and Kwon, connecting their operations to an alleged $40 billion cryptocurrency fraud. Kwon’s trial has been postponed to mid-March due to the extradition request. His legal team has appealed the decision and argues for extradition to South Korea rather than the United States.
Hot Take: Terraform Labs Fights Back Against SEC
Terraform Labs’ decision to file for bankruptcy protection is a strategic move that allows them to continue operating, protect stakeholders’ interests, and pursue an appeal against the SEC’s securities fraud lawsuit. By seeking Chapter 11 protection, they can avoid liquidation, which would have dire consequences for the company. This move demonstrates their determination to challenge the SEC’s claims and assert that the tokens in question are not securities. The upcoming bankruptcy proceedings and potential appeal will be closely watched as they could have significant implications for the future of Terraform Labs and the broader crypto industry.
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