- SEC filed a lawsuit against Terraform and Do Kwon in Feb. 2023
- Terraform filed for bankruptcy on Jan. 21 to a Delaware court
- They don't have to pay a fee to appeal SEC lawsuit
Terraform Labs CEO Chris Amani says the company’s Chapter 11 bankruptcy filing is critical to a successful appeal against the lawsuit filed by the US Securities and Exchange Commission (SEC). Terraform filed for bankruptcy on Jan. 21 to a Delaware court, Cointelegraph reminds.
Terraform can appeal without paying fee
Typically, an appeal against the regulator’s lawsuit would require Terraform Labs to post bond of 110% of the total value in dispute in order to proceed. Under Chapter 11 bankruptcy protection, however, the company can file an appeal without posting this amount.
Amani commented that a successful appeal would eliminate the single largest claim against Terraform, which would be advantageous not only to the company, but also to its creditors and the crypto community in general.
The “what is a security” saga
The company’s CEO wrote in the filing that the upcoming appeal would contest the SEC’s authority to press charges against it and against Do Kwon, its co-founder. He denies that Terraform’s crypto assets are securities.
The case
The US SEC filed a lawsuit against Terraform Labs and Do Kwon in February 2023, accusing them of perpetrating securities fraud worth billions of dollars. The crimes involved the tokens TerraUSD and LUNA.
The bankruptcy filing comes around two weeks after the SEC received a request from Kwon’s lawyers to postpone proceedings and agreed to delay the upcoming fraud trial. Kwon will stand trial on March 25 unless it’s postponed again.
The Terraform Labs ecosystem collapsed in May 2022. Shortly thereafter, Do Kwon disappeared. In March 2023, he was arrested in Montenegro after trying to flee the country with fake travel documents.
40 years in jail
The US and South Korea, where Kwon is originally from, have both requested his extradition. If he is extradited to South Korea, he faces up to 40 years in prison. Allegedly, he committed most of his crimes in his homeland.
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