Do Kwon’s Terraform Labs Filed Chapter 11 Bankruptcy Protection

Jan. 22, 2024
Do Kwon’s Terraform Labs Filed Chapter 11 Bankruptcy Protection

Do Kwon’s Terraform Labs, the company behind the now-defunct stablecoin TerraUSD (UST), has filed for bankruptcy protection in the United States. This is even as the company stays as the out-of-circulation stablecoin – TerraUSD (UST) issuer.

On January 21, the firm filed a Chapter 11 bankruptcy petition in the United States Bankruptcy Court for the District of Delaware. The statement said the estimated liabilities and assets ranged from $100 to $500 million.
This move comes amid a series of legal challenges the firm has faced recently.

Chris Amani, CEO of Terraform Labs, stated in a separate statement that the Terra community and ecosystem have demonstrated unprecedented resilience in the face of adversity, and we require this action to continue working towards our collective goals while resolving the significant legal challenges.

“We have already covered incredible hurdles, and despite great odds, the ecosystem survived and even developed in new ways post-depeg; we look forward to the successful resolution of the proceeding legal actions.”

According to the court appeal, the estimated liabilities of the insolvent firm are $100 million to $500 million. At the same time, it has the same estimated liabilities.

Legal Hurdles & SEC Involvement

The bankruptcy filing came only four days after the U.S. Securities and Exchange Commission agreed to delay Do Kwon’s planned fraud trial until March 25. Kwon’s legal team requested a delay, and authorities allowed it.

The collapse of the Terra Money ecosystem run by Kwon was in May 2022. Co-founder Do Kwon disappeared when the company failed, and it wasn’t until March that Montenegro arrested him for trying to flee the nation using imagined travel documents.

In February 2023, the SEC first took action when it sued Terraform Labs and Kwon on civil charges. The lawsuit against both claimed they orchestrated a “multi-billion dollar crypto asset securities fraud” involving the tokens formerly known as UST and Terra (LUNA).

Both the U.S. and South Korea have sought Kwon’s extradition. Reports have been rife with speculation that Kwon might be subject to multiple sentences in both countries. If extradited to South Korea, Kwon faces a 40-year jail term in the country where it claims that he had committed most of his crimes.

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Ammar Raza

Associate editor
Skilled in crafting compelling content, with a deep enthusiasm for blockchain technology. I offer precise and easily comprehensible perspectives on cryptocurrencies, decentralized finance, and the ever-evolving landscape. Count on me as a reliable resource to remain informed about the latest advancements in the world of crypto.