In a surprising turn of events, Terraform Labs, once a titan in the crypto industry, has filed for bankruptcy protection in the United States.
Terraform Labs applied for Chapter 11 bankruptcy in a January 21 filing to the Bankruptcy Court for the District of Delaware, the company said in a statement issued Monday.
The news brings an ignominious end to the prominent, embattled firm behind the failed TerraUSD (UST) algorithmic stablecoin as the Securities and Exchange Commission’s (SEC) trial against Terra co-founder Do Kwon is postponed, pending his extradition from Montenegro.
Terraform Labs Files For Chapter 11 Bankruptcy
Terraform Labs has filed a voluntary petition in the state of Delaware for Chapter 11 bankruptcy.
The filing shows that Terraform Labs has an estimated 100-199 creditors, with estimated liabilities and assets of between $100 million and $500 million.
The company said in a statement that “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 (SEC).” The cornered crypto company also revealed that it would continue to grow its Web3 business.
The Terra ecosystem imploded in May 2022, wiping out $60 billion worth of investors’ money. Shortly after the company went under, Kwon’s whereabouts remained unknown until he was apprehended in Montenegro in March 2023 after attempting to use a forged passport to flee the country.
The fallen crypto mogul is the subject of a jurisdictional tug-of-war between the United States and his native South Korea, both of which are pursuing criminal charges against him for his role in the Terra failure. Kwon faces over four decades behind bars if found guilty in South Korea.
The U.S. SEC accuses Terraform Labs of “orchestrating a multi-billion dollar crypto asset securities fraud.” The domino effect of Terra’s implosion rippled throughout the crypto market, triggering a crypto winter that saw multiple companies with exposure to the Terra ecosystem declaring bankruptcy.
Chris Amani, CEO of Terraform Labs, posited that “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 bankruptcy filing comes after U.S. District Judge Jed Rakoff in Manhattan just four days ago agreed to delay Kwon’s SEC trial after he requested that it be postponed for him to be able to attend in person.
In late December, Judge Rakoff ruled that Terraform Labs violated federal securities laws when it sold its ill-fated LUNA, UST, and MIR cryptocurrencies to the public — in a major victory for the SEC.
Terra Tokens Take A Beating
LUNA token and Terra luna classic (LUNC) — remnants of the blown-up Terra network fell over the past day following the bankruptcy filing.