Terraform Labs, the company once known for its algorithmic stablecoin TerraUSD (UST), has filed for Chapter 11 bankruptcy protection in the United States, according to the documents filed yesterday (Sunday) with the Bankruptcy Court for the District of Delaware.
Terraform Labs Declares Bankruptcy
The filing showed that the now-defunct crypto company has liabilities in the range of $100 million to $500 million. Its estimated assets also match the liabilities to be in the same range. The company's unsecured creditors include several names, like TQ Ventures, a U.S.-based digital assets investment fund, and Standard Crypto, a San Fransisco-based venture fund.
The company highlighted that it would meet the financial obligations to employees and vendors during bankruptcy protection without the requirement of any additional capital.
“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 filing stated.
“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.”
Circulating that Terraform Labs filed for Chapter 11 on many accounts got me a few DM’s if it is true since the source was not mentioned. It’s true. Closed my $LUNA positions and spot. But fair to say that Chapter 11 is a protection plan as well and they have One year to get… pic.twitter.com/Qc3sWJQZEs
— mrpatrickschmitt (@mr_pschmitt) January 22, 2024
The Massive Crypto Collapse
Founded by Do Kwon, the Terra Money ecosystem collapsed in 2022. The collapse whipped out about $40 billion, and its impact affected a few other companies due to their exposure to the algorithmic stablecoin.
Kown fled quickly amid the collapse of the project, and his whereabouts remained unknown until he was arrested last year in Montenegro while traveling with false documents. He is currently behind bars in Montenegro while the US and South Korea are attempting his extradition. He is likely to face criminal charges in both countries.
In South Korea, where Kown allegedly executed the majority of his illegal plans, the maximum sentencing against his alleged crimes carries 40 years of imprisonment. Meanwhile, in the US, the Securities and Exchange Commission has already filed a civil suit against Terraform Labs and Kown, while the two are also facing the prospect of a class action lawsuit in Singapore.
"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 added.
This article was written by Arnab Shome at www.financemagnates.com.
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