April 19, 2024
Terraform Labs, Creator of TerraUSD, Initiates Chapter 11 Bankruptcy Filing
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Terraform Labs, Creator of TerraUSD, Initiates Chapter 11 Bankruptcy Filing

Terraform Labs, the company behind the now-defunct TerraUSD (UST) stablecoin, has filed for Chapter 11 bankruptcy protection in the United States, revealing estimated liabilities and assets ranging between $100 million and $500 million, according to a filing on January 21 at the United States Bankruptcy Court for the District of Delaware.

In a statement, Chris Amani, CEO of Terraform Labs, acknowledged the resilience of the Terra community and ecosystem while explaining the necessity of the bankruptcy filing. Amani stated, “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.”

He added, “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.”

The court filing revealed that Terraform Labs has estimated liabilities and assets in the range of $100 million to $500 million, signalling a substantial financial impact on the defunct firm.

This development comes just four days after the U.S. Securities and Exchange Commission (SEC) granted a delay for Do Kwon’s upcoming fraud trial to March 25, following a request from Kwon’s legal team to postpone the proceedings.

The downfall of Kwon’s Terra ecosystem began in May 2022. After the firm collapsed, Kwon’s whereabouts remained unknown until he was arrested in Montenegro in March 2023 for attempting to use falsified travel documents to leave the country.

The SEC initially filed civil charges against Terraform Labs and Kwon in February 2023, accusing both parties of orchestrating a “multi-billion dollar crypto asset securities fraud” related to the tokens formerly known as UST and Terra (LUNA).

The legal complications have extended beyond the SEC charges, with both the U.S. and South Korea seeking Kwon’s extradition. Speculation has grown regarding the potential for multiple sentences in both countries.

If extradited to South Korea, Kwon could face a 40-year jail sentence, as the country alleges that the majority of his crimes were committed within its jurisdiction. The bankruptcy filing adds another layer to the ongoing saga surrounding Terraform Labs and raises questions about the future of the Terra ecosystem and its stakeholders.

Image: Freepik

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