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Do Kwon’s Terraform Labs Files for Bankruptcy Protection in US
- Documents reveal Terraform Labs has filed for Chapter 11 bankruptcy protections in the US.
- Terraform Labs say filing is a strategic move to allow the company to continue to pursue its business plan while repaying creditors.
- Terraform Labs and ex-CEO Do Kwon face numerous legal battles both in the US and Singapore relating to the 2022 collapse of Terra ecosystem.
Documents lodged in a Delaware bankruptcy court on January 21 show that Terraform Labs, the company behind the ill-fated Terra blockchain, has filed for Chapter 11 voluntary bankruptcy protections in the US.
The Terra ecosystem spectacularly collapsed in 2022 after its algorithmic stablecoin TerraUSD (UST) depegged from the US dollar, leading to losses of around US$40 billion in the Terra ecosystem alone and sparking a deep crypto winter, which is just now starting to thaw.
Bankruptcy Filing A Strategic Move Says Terraform Labs
In the filing, the Singapore-based Terraform Labs declared its creditors number between 100 and 199, and both its assets and liabilities are in the US$100 to US$500 million range.
In a statement Terraform Labs said the bankruptcy filing was a strategic move which would allow the company to continue to pursue its business plan while addressing its legal entanglements:
The filing will allow TFL to execute on its business plan while navigating ongoing legal proceedings, including representative litigation pending in Singapore and U.S. litigation involving the Securities and Exchange Commission.
Terraform Labs statement
Terraforms Labs’ new CEO Chris Amani also weighed in, sounding a hopeful note:
We have overcome significant challenges before and, against long odds, the ecosystem survived and even grew in new ways post-depeg; we look forward to the successful resolution of the outstanding legal proceedings.
Chris Amani, Terraform Labs CEO Terraform Labs also said it intends to meet all its financial obligations to creditors without the requirement for any additional financing.
Terraform Labs Other Legal Battles
Terraform Labs and its former CEO, Do Kwon, face numerous, serious legal battles relating to TerraLuna’s 2022 collapse.
In the US, the SEC’s case, alleging Do Kwon and Terraform Labs knowingly masterminded a US$40 billion crypto fraud, has been delayed until March to allow the former crypto kingpin to be extradited from Montenegro to face the music in person.
In another US case, a judge in December last year ruled that Terraform Labs cryptocurrencies LUNA and MIA are securities, possibly opening the way for future charges of securities violations.
Meanwhile in Singapore, Terraform Labs and Do Kwon are facing a potential class-action lawsuit brought by 376 victims of the blockchain collapse, claiming they lost a combined total of US$57 million.
Author
Jody McDonald
Jody is a Brisbane-based freelance writer who specialises in writing about business, technology, and the future of work.
