The preferred shares (which are not convertible) were exchanged for a note which WAS convertible, at a discount to the current PPS (a toxic debenture).
It is not illegal and there's no reason, other than the screwing over of common shareholders that it couldn't be done.
You probably noticed, but TEUFF's management is not what would be described as "shareholder friendly"
News 
Market Data 
Discover 
AI
