Key Takeaways
- As per the filing, the firm had between $100 to $500 million in estimated assets as well as liabilities
- Unsecured creditors include TQ Ventures, Standard Crypto among others
Terraform Labs, the firm at the center of the TerraUSD (UST) collapse, has entered Chapter 11 bankruptcy protection in the United States, seeking solace as it faces a cascade of legal challenges. The Singapore-based company, co-founded by crypto entrepreneur Do Kwon, filed for bankruptcy in the United States Bankruptcy Court for the District of Delaware, listing assets and liabilities in the range of $100 million to $500 million.
Do Kwon, who faced an international arrest following the collapse of TerraUSD and its sibling token Luna, has been in the legal crosshairs since March last year. Kwon, along with Terraform Labs’ Chief Financial Officer Han Chang Joon, was apprehended in Montenegro after being on the run since May 2022.
The bankruptcy filing is a strategic move by Terraform Labs to execute its business plan while grappling with ongoing legal battles, including representative litigation in Singapore and a case involving the U.S. Securities and Exchange Commission (SEC). The company emphasizes its commitment to meeting financial obligations to employees and vendors during the Chapter 11 proceedings without necessitating additional financing.
Chris Amani, CEO of Terraform Labs, remarked on the situation, stating, “The Terra community and ecosystem have shown unprecedented resilience in the face of adversity, and this action is necessary to allow us to continue working toward our collective goals while resolving the legal challenges that remain outstanding.”
The collapse of TerraUSD in May 2022 resulted in significant losses, with both TerraUSD and Luna losing about $40 billion in value. This triggered a downturn in the broader cryptocurrency markets, prompting legal repercussions for Terraform Labs and Do Kwon.
The bankruptcy filing follows a recent SEC decision to postpone Do Kwon’s upcoming fraud trial to March 25, responding to a request from Kwon’s legal team. The SEC’s charges against Terraform Labs and Kwon allege their involvement in a fraudulent scheme that caused substantial losses for investors. The trial delay comes as Kwon appeals the court’s decision regarding his extradition to the U.S. from Montenegro.
Terraform Labs, in its bankruptcy filing, disclosed estimated assets and liabilities between $100 million and $500 million. The move aims to allow the company to continue its business plan while navigating the complex legal landscape, providing a path forward amid ongoing legal proceedings in multiple jurisdictions.
