Crypto firm Terraform Labs files for US bankruptcy protection

Terraform Labs (TFL), the company behind the stablecoin TerraUSD, which collapsed and roiled cryptocurrency markets in 2022, filed for Chapter 11 bankruptcy in the US, according to court papers.

Singapore-based Terraform Labs, in a filing with the bankruptcy court in Delaware on Sunday, listed assets and liabilities in the range of $100m-$500m.

Terraform Labs said it would meet all financial obligations to employees and vendors during the Chapter 11 case without requiring additional financing. It also plans to continue Web3 offerings expansion.

“The filing will allow TFL to execute on its business plan while navigating ongoing legal proceedings, including representative litigation pending in Singapore and US litigation involving the Securities and Exchange Commission (SEC),” Terraform Labs said in a statement.

The SEC’s civil case against Terraform and Do Kwon is linked to the collapse of TerraUSD, a “stablecoin” designed to maintain a constant $1 price, and the more traditional token Luna, which closely associated with TerraUSD.

Kwon is in jail in Montenegro after having been found guilty of forging documents, which he denied. He also faces charges in South Korea and Singapore.

Recently, a federal judge postponed the trial of the SEC against the company and its co-founder, Kwon, over an alleged $40bn cryptocurrency fraud, to enable Kwon’s extradition for his participation.

Kwon and Terraform Labs were held responsible for two cryptocurrencies whose collapse caused turbulence in crypto markets around the world two years ago.

Both cryptocurrencies lost about $40bn or more when TerraUSD failed to maintain its $1 peg in May 2022. About $400bn was wiped from the value of other cryptocurrencies such as bitcoin, it is estimated.

Reuters