Following the 2022 collapse of its cryptocurrencies, Singapore-based Terraform Labs (TFL), the firm behind digital assets TerraUSD (UST) and Luna, filed for Chapter 11 bankruptcy in Delaware.
The Chapter 11 bankruptcy protection petition was confirmed by Terraform Labs, which noted it as a strategic move that will allow it to sustain its operations and support litigation ongoing in Singapore and U.S. litigation involving the Securities and Exchange Commission. The group stated it wouldn't need more funding in order to "meet all financial obligations to employees and vendors during the Chapter 11 case.”
In a court filing earlier this week, Terraform Labs' estimated assets and liabilities are between $100 million and $500 million, with between 100 and 199 creditors.
Terraform Labs stated that it intends to keep growing its web3 business. The startup launched Station v3, a cryptocurrency wallet, earlier this month and just acquired Pulsar Finance, a cross-chain portfolio manager and data vendor.
“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,” stated Chris Amani, CEO of Terraform Labs.
Founded in 2018, Terraform Labs collapsed the cryptocurrency market in May 2022, wiping out at least $40 billion in market value.
The announcement of bankruptcy was made four days after the U.S. SEC decided to move the civil trial against Do Kwon, a co-founder of Terraform Labs, and the company for an alleged $40 billion cryptocurrency scam from January 29 to March 25.
Kwon is being held in detention in Montenegro for leaving the nation in March using forged travel documents. The co-founder of Terraform Labs could be extradited to the United States or South Korea in March following the extradition decision, which is entirely up to the justice minister of Montenegro.
Last year in February, the U.S. SEC charged Kwon and Terraform Labs with scamming the U.S. investors who purchased the digital assets Terra USD and Luna.
As per the court petition, Kwon holds a 92% ownership in Terraform Labs, while Daniel Shin, another co-founder of the company, holds an 8% investment in TFL.