Limiting Creditor’s Rights: SEC’s Authority to Prevent Involuntary B...

By: Mark Sicari
St. John's Law Student
American Bankruptcy Institute Law Review Staff

In S.E.C. v. Byers[1], the Second Circuit determined that the district court had the equitable authority to enter an anti-litigation injunction that prohibited creditors from filing an involuntary bankruptcy petition against a debtor that is in an SEC receivership.[2] Responding to a $250 million Ponzi scheme perpetrated by the debtor companies, the SEC requested immediate injunctive relief from the district court.[3] The court appointed a receiver and entered an anti-litigation injunction.[4] Specifically, the injunction prevented creditors from filing an involuntary bankruptcy petition.[5] The Second Circuit affirmed the injunction, explaining that the district court’s equitable powers enabled it to keep the receivership assets out of bankruptcy.[6]

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