Terraform Labs, the Singapore-based firm responsible for the collapse of the TerraUSD stablecoin ecosystem in 2022 has filed for Chapter 11 bankruptcy protection. According to the filing with a Delaware bankruptcy court on Jan. 21, the firm has disclosed assets and liabilities ranging between $100 million and $500 million.
The bankruptcy filing reveals that the firm has between 100 and 199 creditors, shedding light on the extensive impact of its financial troubles. Notably, this move comes shortly after a federal judge postponed the trial involving the Securities and Exchange Commission (SEC) and co-founder Do Kwon. The SEC accuses Kwon of involvement in an alleged $40 billion cryptocurrency fraud, contributing to the recent downfall of the Terra/Luna ecosystem.
Do Kwon’s Legal Troubles
Do Kwon, facing charges from both the US and South Korea, is currently in custody in Montenegro for using a fake passport. The collapse of the Terra/Luna ecosystem had severe repercussions, wiping out billions from the crypto market and triggering a chain reaction that led to the collapse of several prominent digital asset firms in 2022. Kwon’s potential extradition to the US is anticipated by mid-March to face fraud charges.
Terraform Labs’ Perspective
In response to the situation, Chris Amani, the chief executive officer of Terraform Labs, emphasized the resilience of the Terra community and ecosystem. Amani stated that the Chapter 11 filing is necessary to address legal challenges while enabling the pursuit of collective goals. Expressing optimism, Amani mentioned overcoming previous challenges and highlighted the ecosystem’s growth post-depeg.
According to court documents, Do Kwon is identified as the majority shareholder, holding 92% of Terraform Labs. The remaining ownership belongs to South Korean entrepreneur Daniel Shin, as detailed in the legal papers. The unfolding events surrounding this bankruptcy filing will undoubtedly have ripple effects on the crypto industry, and stakeholders will be closely watching for further developments.
