Terraform Labs Files for Chapter 11 Bankruptcy Protection in US

Terraform Labs (TFL) has officially filed for Chapter 11 bankruptcy protection in the United States. This comes two years after the collapse of TerraUSD and its associated cryptocurrency, Luna.

Terraform Labs Files for Chapter 11 Bankruptcy Protection in US

Also Read: Elon Musk Denies Report Claiming his xAI Firm Secured $500 Million Funding

TerraUSD, envisioned as an algorithmic stablecoin designed to maintain a steady $1 peg, failed in May 2022.

The algorithmic mechanism’s breakdown triggered a domino effect, resulting in the collapse of both TerraUSD and Luna.

The market saw the wipeout of billions of dollars in investor value as both cryptocurrencies plummeted to near-zero values.

The collapse left financial ruin and accusations of mismanagement against Terraform Labs and its co-founder, Do Kwon.

The Securities and Exchange Commission (SEC) in the United States filed civil charges against Terraform Labs and Do Kwon in February last year.

The SEC alleged a $40 billion cryptocurrency fraud, accusing them of misleading investors and manipulating the TerraUSD peg. The legal battle has with litigation in both Singapore and the U.S.

In its Chapter 11 bankruptcy filing, presents the move as a step to the ongoing legal challenges while continuing operations.

The company addresses its commitment to meeting all financial obligations to employees and vendors throughout the bankruptcy proceedings without the need for additional financing.

The bankruptcy filing reveals that Terraform Labs faces estimated assets and liabilities ranging from $100 million to $500 million.

Also Read: Sports Illustrated Layoffs Almost Entire Staff

The number of creditors falls within the range of 100 to 199, including names such as TQ Ventures and Standard Crypto among the unsecured creditors.

Terraform Labs shows its commitment to expanding its Web3 offerings. Recent moves include the acquisition of Pulsar Finance, a cross-chain portfolio manager and data provider, and the launch of Station v3, a cryptocurrency wallet.

The company’s CEO, Chris Amani, frames the Chapter 11 filing as a strategic move, addressing the necessity to address legal challenges while pursuing collective goals.

The bankruptcy filing comes four days after a federal judge agreed to postpone the SEC’s civil trial against Terraform Labs and Do Kwon.

The trial, scheduled for January 29, has been rescheduled to March 25. Do Kwon, currently in custody in Montenegro, faces possible extradition to the U.S. or South Korea. His extradition will depend on the final ruling by Montenegro’s Justice Minister.

The collapse of TerraUSD dealt a blow to the reputation of the cryptocurrency market, increased regulatory security. While the market has somewhat recovered.

The bankruptcy filing, revealed through court documents on January 21, discloses estimated assets and liabilities ranging from $100 million to $500 million.

As the crypto market struggling with the aftermath of one of the largest crypto collapses in history, Terraform Labs plans to use Chapter 11 as a strategic maneuver to navigate legal challenges and continue its operations.

Also Read: Reddit Plans to Launch IPO in March 2024

Top Sources Related to Terraform Labs Files for Chapter 11 Bankruptcy Protection in US (For R&D)

AP News:

Euronews:

BBC News:

CNBC:

Reuters:

The Hill: