Singapore-based Terraform Labs (TFL), the company behind digital assets TerraUSD (UST) and Luna, has filed for Chapter 11 bankruptcy in Delaware. This move comes in the wake of the collapse of its cryptocurrencies in 2022.
Key Takeaway
Terraform Labs, the company behind digital assets TerraUSD (UST) and Luna, has filed for Chapter 11 bankruptcy in Delaware following the collapse of its cryptocurrencies in 2022. The bankruptcy filing is a strategic move to enable the company to continue its operations and address ongoing legal challenges, while also meeting its financial obligations to employees and vendors.
The Bankruptcy Filing
Terraform Labs has confirmed its Chapter 11 bankruptcy protection filing, stating that it is a strategic step to enable the company to continue its operations and support ongoing litigation in Singapore and the U.S., particularly involving the Securities and Exchange Commission (SEC). The company has also assured that it will meet all financial obligations to employees and vendors during the Chapter 11 case without requiring additional financing.
Financial Overview
According to a court document filed today, Terraform Labs’ estimated assets and liabilities range from $100 million to $500 million, with the number of creditors falling between 100 and 199.
Future Plans
Despite the bankruptcy filing, Terraform Labs has expressed its intention to continue expanding its Web3 business. The company recently acquired Pulsar Finance, a cross-chain portfolio manager and data provider, and launched Station v3, a cryptocurrency wallet, earlier this month.
Statement from CEO
Chris Amani, CEO of Terraform Labs, emphasized the resilience of the Terra community and ecosystem in the face of adversity. He stated that the Chapter 11 filing is necessary to allow the company to continue working towards its collective goals while addressing the legal challenges that remain outstanding.
Background and Legal Issues
Founded in 2018, Terraform Labs suffered a significant loss of at least $40 billion in market value, leading to the collapse of the crypto industry in May 2022. The bankruptcy filing comes shortly after the U.S. SEC agreed to postpone the civil trial against Terraform Labs and co-founder Do Kwon over an alleged $40 billion cryptocurrency fraud. Kwon, who currently faces custody in Montenegro, could potentially be extradited to the U.S. or South Korea after the final ruling on extradition, which rests with Montenegro’s Justice Minister.
Legal Charges
In February last year, the U.S. SEC charged Kwon and Terraform Labs with defrauding U.S. investors who purchased the digital assets Terra USD and Luna. Kwon holds a 92% stake in Terraform Labs, while Daniel Shin, another co-founder of the company, has an 8% stake, as per the court filing.
