Crypto News- Terraform bankruptcy protection strategically employed: In a surprising turn of events, Chris Amani, the CEO of Terraform Labs, recently revealed that the company’s decision to file for Chapter 11 bankruptcy is a strategic maneuver aimed at bolstering its chances in an ongoing fraud lawsuit brought forth by the United States Securities and Exchange Commission (SEC).
Terraform Bankruptcy Protection Strategically Employed to Enhance Appeal Amid SEC Lawsuit, Affirms Chris Amani
Amani underscored the significance of the Chapter 11 filing, emphasizing its pivotal role in ensuring the company’s continued operations, preserving value for creditors and stakeholders, and facilitating the pursuit of an appeal against the SEC Enforcement Action. With estimated assets and liabilities ranging between $100 million and $500 million, Terraform Labs finds itself at a critical juncture.
The bankruptcy hearing, scheduled to kick off today, promises to unveil the company’s financial standing and its roadmap for the future. However, the appeal against the SEC lawsuit presents its own set of challenges. Normally, to proceed with such an appeal, Terraform Labs would be required to furnish a superseded bond. Amani, noting the financial strain this would impose, pointed out the potential size of the money judgment. The Chapter 11 bankruptcy proceedings provide a strategic advantage by allowing Terraform Labs to pursue the appeal without the immediate need to post the bond.
Terraform Labs Navigates Legal Turmoil: Chapter 11 Bankruptcy Filing and SEC Lawsuit Unraveled
Terraform Labs is banking on the belief that a self-funded Chapter 11 filing is the optimal course of action, offering the necessary breathing room to pursue the appeal, continue its software development business, and sustain the value of LUNA for stakeholders.
The backdrop of the SEC lawsuit dates back to February 16, 2023, when the SEC filed a complaint against Terraform Labs and its founder, Kwon Do Hyeong. The allegations revolved around a purported multi-billion dollar crypto asset securities fraud, accusing the company of conducting unregistered transactions while raising billions from investors.
In a significant development on December 28, 2023, the District Court granted partial summary judgment to the SEC, affirming that Terraform Labs had offered and sold unregistered securities by issuing its native tokens to investors. However, the court also ruled in favor of Terraform Labs on certain securities-based swap counts. The remaining securities fraud claims are slated to be resolved at the trial, set to commence on March 25.
Amani vehemently contested the SEC’s claims, arguing that the crypto tokens in question did not qualify as securities under the Acts. He reiterated the firm’s stance that the SEC lacked the necessary authority to charge Terraform Labs or its co-founder, Do Kwon.