January 22, 2024

Terraform Labs, Formerly Led by Do Kwon, Seeks Chapter 11 Bankruptcy Protection

The company, responsible for the now-defunct TerraUSD (UST) stablecoin, has initiated Chapter 11 bankruptcy proceedings, revealing estimated assets and liabilities ranging between $100 million and $500 million.

Terraform Labs, formerly led by Do Kwon, the entity behind the no-longer-operational TerraUSD (UST) stablecoin, has officially filed for Chapter 11 bankruptcy protection in the United States.

The filing took place at the United States Bankruptcy Court for the District of Delaware on January 21, disclosing an estimated range of $100 million to $500 million in both assets and liabilities.

In a separate statement, Chris Amani, CEO of Terraform Labs, expressed the necessity of this legal action, stating:

“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.”

Amani added:

“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 court filing indicates that the defunct firm's estimated liabilities and assets both fall within the $100 million to $500 million range.

This bankruptcy filing closely follows the U.S. Securities and Exchange Commission's (SEC) decision to delay Kwon’s upcoming fraud trial until March 25, responding to a request from his legal team to postpone the proceedings.

The Terra ecosystem, led by Kwon, faced a collapse in May 2022. Following the company's implosion, Kwon's whereabouts remained unknown until his arrest in Montenegro in March 2023. The arrest took place after an attempt to use falsified travel documents to leave the country.

Kwon's projects suffered substantial losses in May 2022 when the Luna crypto network collapsed, resulting in an estimated $60 billion loss in the digital currency space.

In February 2023, the SEC initially filed civil charges against Terraform Labs and Kwon, accusing them of orchestrating a "multi-billion dollar crypto asset securities fraud" involving the tokens previously known as UST and Terra (LUNA).

With both the U.S. and South Korea seeking Kwon’s extradition, speculation is growing that he could face multiple sentences in both countries. If extradited to South Korea, Kwon may be confronted with a potential 40-year jail sentence, as the majority of his alleged crimes were committed in that country.

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