A few days after Terraform Labs announced its decision to file for Chapter 11 bankruptcy protection, the blockchain firm came forward with another statement stating that the move would aid them in their appeal with the United States Securities and Exchange Commission (the SEC) lawsuit.
On January 30, the CEO of Terraform Labs, Chris Amani, stated in a filing made to the Delaware Bankruptcy Court that the Chapter 11 bankruptcy filed by the company is crucial for effectively challenging its case with the SEC. The creators of the now defunct stablecoin TerraClassicUSD (USTC) initiated the bankruptcy proceedings on January 21.
A typical appeal to be made against the SEC would require Terraform Labs to provide a supersedeas bond that should amount to 110% of the total judgment before proceeding.
A supersedeas bond, also known as an appeal bond, is a type of financial guarantee required by a court when a party wishes to appeal a judgment.
The bond serves as a form of security to ensure that if the appeal is unsuccessful, the appellant (the party filing the appeal) can fulfill the original judgment, including any damages and costs awarded.
However, the Chapter 11 bankruptcy protections may enable the company to pursue the appeal without posting the bond.
The statement read that if the appeal made by Terraform Labs is successful, it would eliminate the single largest claims against a debtor, which would benefit not only the debtor itself but also prove beneficial for its creditors and, more broadly, the general community.
Another noteworthy claim by Chris Amani in the filed documents states that the forthcoming appeal will establish that the Securities and Exchange Commission lacks the authority to bring charges against the company or its co-founder, Do Kwon.
The statement is very bold, to say the least, especially since the environment around Do Kwon has turned very hostile as he is waiting to learn about his future regarding which country he will be extradited to and what sentence he will face there once he goes through a trail.
Amani also contended that the crypto assets held by Terraform Labs should not be classified as securities and maintained that the SEC does not have jurisdiction over this particular case.
Furthermore, Amani stated that Terraform Labs’ treasury contains around $28 million in Bitcoin, $7 million in various other cryptocurrencies, and approximately $87 million in Luna tokens.
The infamous incident of the TerraLuna crash in May of 2022 has been discussed many times, and we don’t need to shed more light on its impact on the crypto industry. Moving on from the initial incident, the SEC filed a civil suit against Terraform Labs and its infamous founder, Do Kwon, in February 2023, accusing both parties of indulging in a multibillion-dollar securities fraud that involved leveraging the use of tokens formerly known as UST and LUNA.
The recent filing made by Terraform Lab comes approximately two weeks after the SEC agreed to postpone Do Kwon’s upcoming trial to March 25 after receiving a request from his legal team to delay the proceedings.
Kwon fled the country of South Korea shortly after the implosion of Terraform Labs and tried to evade capture by relevant authorities. He was ultimately arrested in Montenegro in March 2023 after he was caught attempting to flee the country using falsified travel documents.
The United States and South Korea are both pursuing the extradition of Do Kwon. Kwon could face multiple sentences if extradited to either of these two countries. In South Korea, he may be confronted with a 40-year jail term, as it is alleged that the majority of the crimes he is accused of occurred inside South Korea.
