Crypto Firm Terraform Labs Starts Bankruptcy Proceedings

Crypto Firm Terraform Labs Starts Bankruptcy Proceedings

Published: January 22, 2024

Terraform Labs, the Singapore-based company behind the cryptocurrency LUNA and the stablecoin TerraUSD (UST), has filed for Chapter 11 bankruptcy in the United States.

According to the bankruptcy filing in Delaware, Terraform Labs estimates its assets and liabilities to be both within the range of $100 million to $500 million.

The digital asset company also reports having between 100 and 199 creditors.

Terraform Labs intends to meet all financial obligations to employees and vendors during the Chapter 11 proceedings without requiring additional financing.

“The filing will allow TFL to execute 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),” said Terraform Labs in a statement.

The move comes amidst ongoing legal proceedings related to the 2022 collapse of LUNA and UST, which cleaned up over $40 million of its investors’ money and contributed to a $2 trillion decline and numerous bankruptcies within the sector.

The highly controversial fall of Sam Bankman-Fried’s FTX is also attributed to the liquidity crisis sparked by the LUNA and UST collapse.

Terraform Labs co-founder Do Kwon, who owns 92% of its shares, is currently facing fraud charges in both South Korea and the U.S. related to the incident.

The SEC recently approved the postponement of Kwon’s trial from January 29 to March 25. Kwon is currently detained in Montenegro on charges of using a fake passport and is expected to be extradited by mid-March.

The Chapter 11 filing is expected to allow Terraform Labs to navigate ongoing legal proceedings while executing its business plan.

The company still plans to continue expanding its Web3 offerings.

“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,” Terraform Labs CEO Chris Amani concluded.

Subscribe to Spotlight Newsletter
Subscribe to our newsletter to get the latest industry news