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Terraform Labs, the firm behind the massively devalued algorithmic Terra USD stablecoin (USTC), filed for Chapter 11 bankruptcy in the U.S. District of Delaware on Jan. 21.
The crypto company’s decision to seek bankruptcy protection was driven by a strategic move to concentrate on its business plan amid ongoing legal battles, including significant litigation from the U.S. Securities and Exchange Commission (SEC) following the Terra/Luna collapse.
Nevertheless, the company asserts its ability to independently meet financial commitments to employees without external assistance. It further noted that its assets and liabilities fall within $100 million to $500 million.
The court filing showed that its list of unsecured creditors includes co-founders Do Kwon and Daniel Shin and major entities like Amazon Web Services Singapore, Three Arrow Fund, and others.
Chris Amani, the CEO of Terraform Labs, explained that the bankruptcy filing was necessary to address the outstanding legal issues. Armani expressed confidence that this legal maneuver would facilitate the company’s commitment to advancing innovative tools, infrastructure, and ecosystem support.
“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,” Armani added.
The Chapter 11 filing comes amid an impending trial with the SEC, where both Kwon and Terraform Labs face litigation related to the $40 billion crash of the ecosystem. The trial, originally slated for this month, has been postponed by the U.S. Court overseeing the case to allow Kwon to be physically present at the proceedings.
Kwon is currently held in Montenegro after he was caught traveling with forged documents in the European country.
Terra tokens dump
According to CryptoSlate’s data, various Terra-based tokens experienced notable declines over the past 24 hours following the news.
USTC recorded a significant drop of 7.64% within the reporting period, settling at $0.02491. Since its depeg in May 2022, several community efforts to restore its value through different initiatives have proven unsuccessful.
LUNC, too, saw a decrease of 6.82% during the reporting period, currently priced at $0.00010—marking a substantial 100% decline from its all-time high of $119.
In addition, the native token of the ecosystem’s new blockchain, LUNA, experienced a downturn of 7% to $0.61381 as of press time.
Meanwhile, it is crucial to note that these declines align with a broader market trend, where major cryptocurrencies such as Bitcoin, Ethereum, Solana, and XRP have collectively shed an average of more than 2% of their respective values during the same period.