It has been said by Terraform Labs that the filing for bankruptcy protection under Chapter 11 would make it possible for the company to pursue an appeal against the securities fraud action brought by the United States Securities and Exchange Commission (SEC).
Chris Amani, the Chief Executive Officer of Terraform Labs, recently made a filing in which he stressed the significance of bankruptcy protection for the protection of the company's operations and the maintenance of value for stakeholders, including the Terra community.
"[The bankruptcy protection] is essential to the Debtor's ability to continue operating as a going concern, to maintain value for its creditors and stakeholders (including the Terra community), to be able to pursue an appeal of the SEC Enforcement Action, and to provide an orderly process for resolving competing claims against it,"
The corporation submitted its petition for bankruptcy under Chapter 11 to the United States Bankruptcy Court for the District of Delaware on January 21. The petition said that the company's assets and liabilities were estimated to be between $100 million and $500 million.
A hearing is scheduled to take place on Wednesday in the United States, which will mark the beginning of the bankruptcy procedures.
If there was no protection from bankruptcy, Terraform would be subject to liquidation.
According to Amani, if Terraform Labs were to be forced to submit to a major monetary judgment, it is quite possible that the company would be unable to settle the judgment or post the required bond in order to appeal the decision.
In the absence of the protection afforded by Chapter 11, the result of the trial and the ultimate verdict would most likely be liquidation.
A successful appeal against the accusations made by the SEC, on the other hand, has the potential to lessen the liabilities of Terraform Labs and might result in favorable financial consequences for the firm, its creditors, and the community as a whole.
Kwon Do-hyeong, the former CEO of Terraform Labs, was charged with securities fraud by the Securities and Exchange Commission in February of 2023.
It was stated by the commission that the group was responsible for a "multi-billion dollar crypto asset securities fraud" while simultaneously generating considerable amounts from investors via the offering and sale of linked crypto asset securities, the majority of which were transactions that were not registered through the appropriate authorities.
Amani said once again that Terraform Labs is in disagreement with the decision of the District Court about the summary judgment, and she maintained that the cryptocurrency tokens in issue do not qualify as securities according to the applicable Acts.
As a consequence of this, Amani argued that the SEC Enforcement Action is not within the SEC's ability to exercise jurisdiction.
A summary judgment was delivered in December by Judge Jed Rakoff of the United States District Court for the Southern District of New York. In that finding, the judge agreed with the Securities and Exchange Commission's assertion that Terra marketed securities that were not registered.
Awaiting his extradition is Do Kwon.
Former Terra CEO Do Kwon, who was detained in Montenegro in March of the previous year for trying to travel with fraudulent papers, is presently awaiting extradition. His detention occurred in March of the previous year.
The Securities and Exchange Commission (SEC) has been pursuing a legal action against Terraform Labs and Kwon, alleging that their activities were involved in a theft of $40 billion worth of cryptocurrencies.
Due to Kwon's request for extradition, the Securities and Exchange Commission (SEC) had already agreed to postpone Kwon's trial until the middle of March.
The legal team representing Kwon has filed an appeal against the judgment of the Montenegro High Court to sustain the extradition petitions that were submitted by both the United States of America and South Korea.
In addition, Goran Rodic, who is Do Kwon's legal agent in Montenegro, has offered an argument that supports the extradition of Kwon to South Korea rather than to the United States.
Rodic argued that Kwon, who is a citizen of South Korea, ought to be sent to South Korea. He supported his position by referring to the European Convention on the Extradition of Criminals, the bilateral agreement between Montenegro and the United States, and local legislation concerning foreign legal assistance.
