2nd Circ. Says Courts Can Stop Involuntary Bankruptcy

Law360, New York (June 15, 2010, 7:13 PM EDT) -- In a case involving a $255 million Ponzi scheme, a federal appeals court has ruled that district judges can stop creditors from initiating involuntary bankruptcies against entities put under receivership.

A three-judge panel of the U.S. Court of Appeals for the Second Circuit said Tuesday that a district judge had the authority to enjoin creditors of WexTrust Capital LLC from filing involuntary bankruptcy proceedings.

The U.S. Securities and Exchange Commission alleged in 2008 that the fund, its affiliates and its leaders bilked more than 1,000 investors,...
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