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Terraform Labs, the company behind the stablecoin TerraUSD and its sister cryptocurrency Luna, filed for Chapter 11 bankruptcy in the U.S. Bankruptcy Court for the District of Delaware on January 21.
Terraform Labs Files for Chapter 11 Bankruptcy in Delaware
The company's liabilities and assets are estimated to be between $100 million and $500 million, as stated in its filing.
This move was the latest development after both TerraUSD and Luna collapsed in May 2022. In February 2023, the US Securities and Exchange Commission (SEC) accused the firm and then-CEO Do Kwon of fraud.
Terraform Labs said in a statement that filing for bankruptcy will enable the company to manage ongoing legal affairs, including SEC litigation and a lawsuit pending in Singapore.
“This step preserves our ability to continue working with the community on infrastructure, innovative tools, products, and other ecosystem support,” said Terraform Labs CEO Chris Amani.
Kwon was arrested in Montenegro in March last year for trying to travel with false documents.
The former Terra CEO is currently awaiting extradition from the country. Meanwhile, the U.S. District Court for the Southern District of New York postponed the SEC's lawsuit against Terraform and Kwon until the end of March, at Kwon's request.
While Terraform Labs navigates these legal challenges, the crypto industry is closely monitoring the potential ripple effects this could have on the market.
*This is not investment advice.