Second Circuit upholds Vystar's legal victory against EMA, dismissing claims and reinforcing protections for micro-cap firms in convertible note disputes.
On November 27, 2024, the U.S. District Court for the Southern District of New York delivered a significant ruling in the case EMA Financial LLC v. Vystar Corporation, case number 19-cv-1545 (GWG). The court ruled in favor of Vystar, a micro-cap company, by dismissing EMA Financial’s damages claim amounting to $4,226,187. This claim stemmed from a dispute over a toxic convertible note. The judgment marked a precedent-setting victory for a small-cap issuer in such matters. Although Vystar’s counterclaim for damages was not granted by the district court, it was still awarded legal fees as part of the decision.
Following this ruling, both EMA Financial and Vystar appealed the district court’s decision to the United States Court of Appeals for the Second Circuit. EMA aimed to overturn the dismissal of its complaint, while Vystar filed a cross-appeal seeking reversal of the denial of its counterclaims concerning EMA’s alleged breach of the convertible note terms.
On July 17, 2025, the Second Circuit upheld the original decision of the district court. While the appellate court did not side with Vystar on the counterclaim issue, it affirmed the dismissal of EMA Financial’s complaint. This outcome now returns the matter to the district court, which will determine the amount of legal fees to be awarded to Vystar. To date, Vystar has recorded nearly one million dollars in legal expenses related to this case, dating back to 2018.
Vystar publicly acknowledged and expressed gratitude to everyone involved in the lengthy legal battle. The company emphasized the uniqueness of this outcome, as no other issuer had previously succeeded in challenging EMA Financial’s breach of contract allegations concerning convertible notes.
Vystar attributed much of its success to the efforts of its litigation counsel, Barry Bordetsky of The Law Offices of Barry M. Bordetsky. The company commended Bordetsky’s unwavering commitment and legal acumen, describing his approach as strategic, disciplined, and deeply invested in defending a smaller company against much larger adversaries. Vystar highlighted that such dedication is rare among litigators and credited Bordetsky for preventing the company from suffering the fate of many other micro-cap firms—namely, falling victim to judgments issued under similar circumstances involving EMA Financial.
This case serves as a milestone for micro-cap companies navigating legal challenges related to toxic convertible notes, offering hope and precedent for those facing similar litigation in the future.
Headquartered in Worcester, Massachusetts, Vystar® Corporation (OTCQB: VYST) owns a portfolio of innovative products, including RxAir® UV light air purifiers that eliminate airborne viruses and pathogens, Vytex® Natural Rubber Latex (NRL), and Fluid Energy Solutions. Vytex is a multi-patented, all-natural raw material that offers significantly reduced protein levels compared to traditional natural rubber latex. This results in a stronger, more durable, eco-friendly, and fully biodegradable material suitable for a wide variety of medical and consumer applications.
