Terraform Labs said on Tuesday that its recent bankruptcy filing will enable it to pursue a "do-or-die" appeal in a securities fraud case brought by the U.S. Securities & Exchange Commission.
The blockchain company's statement, made in a bankruptcy court filing, refers to a ruling in December by a federal judge that found Terraform Labs and its founder Do Kwon violated U.S. law by failing to register two digital currencies whose collapse roiled cryptocurrency markets in 2022.
Trials will begin in March on the SEC's remaining fraud claims, but Terraform Labs said in the court filing that it likely could not afford to pay the yet-to-be-determined judgment or pursue an appeal.
"The exact size of a money judgment remains unknown, but it could very well outstrip the debtor's assets," Terraform's head of company operations Chris Amani wrote in a court filing.
The company has access to about $28 million in Bitcoin, $7 million of various other cryptocurrencies, and about $87 million in its own token, Luna, per its court filings.
Terraform Labs intends to argue on appeal that the SEC has no authority over the company because its cryptocurrency tokens are not "securities."
Such an appeal would normally require the company to post bond of 110% of the total judgment value before it can proceed. But a Chapter 11 bankruptcy may enable the company to appeal without posting a bond, according to Terraform Labs.
"Without the protection of chapter 11, the Debtor would likely have to liquidate after the trial," Amani wrote.
An SEC spokesman declined to comment Tuesday.
Terraform says it intends to continue developing tools and applications for the new Terra blockchain that it created in the wake of its 2022 collapse. The company is building its own products, like its crypto wallet "Station" and also encouraging third-party development of applications for its Terra blockchain.
Terraform was at the center of the so-called "crypto winter" of 2022, when collapsing asset prices bankrupted many other crypto companies.
