Terraform Labs Files for Chapter 11 Bankruptcy Protection – Terraform Labs, the company responsible for the now-defunct TerraUSD (UST) stablecoin, has initiated the process of seeking bankruptcy protection in the United States. The company filed for Chapter 11 bankruptcy protection at the United States Bankruptcy Court for the District of Delaware, revealing estimated liabilities and assets ranging between $100 million and $500 million in a filing dated January 21.
“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,” said Chris Amani, CEO of Terraform Labs in a separate statement.
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“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.” As per the court document, the now-closed company holds an estimated range of $100 million to $500 million in liabilities, mirroring the equivalent amount in estimated assets.
The submission for bankruptcy occurred a mere four days following the U.S. Securities and Exchange Commission’s (SEC) approval to defer Kwon’s impending fraud trial to March 25. This postponement was granted in response to a request from his legal team to extend the legal proceedings.
In May 2022, Kwon’s Terra ecosystem experienced a collapse. Following the company’s downfall, the location of its co-founder became a mystery until March 2023, when he was apprehended in Montenegro. His arrest occurred as he tried to depart the country using forged travel documents.
In February 2023, the Securities and Exchange Commission (SEC) initially brought forth civil charges against Terraform Labs and Kwon. The accusations implicated both entities in orchestrating a “multi-billion dollar crypto asset securities fraud,” specifically tied to the tokens previously identified as UST and Terra (LUNA).
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The extradition of Kwon is being pursued by both the United States and South Korea. There is increasing speculation that Kwon might be subject to concurrent sentences in both nations. Should Kwon be extradited to South Korea, he may face a 40-year prison term in the country where the majority of his alleged crimes took place.