Effects Of SEC V. Byers On Creditors' Rights

Law360, New York (August 9, 2010, 12:03 PM EDT) -- Whether district courts have the ability to bar creditors from filing involuntary bankruptcy petitions under the Bankruptcy Code against U.S. Securities and Exchange Commission receivership defendants is not specifically addressed in the Bankruptcy Code nor any other federal statutes. But, at least in the Second Circuit, that question has been answered affirmatively.

In SEC v. Byers (a $255 million civil fraud enforcement action stemming from a Ponzi scheme run by Wextrust and related parties), the Second Circuit upheld the district court’s authority to enter an anti-litigation...
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