In a pivotal development, Terraform Labs, the entity behind the once-thriving stablecoin TerraUSD (UST), has sought Chapter 11 bankruptcy protection in the United States. The filing, lodged at the United States Bankruptcy Court for the District of Delaware, indicates the company’s estimated liabilities and assets between $100 million and $500 million.
The bankruptcy filing comes in the wake of the dramatic collapse of its Terra ecosystem in May 2022. This event had a cascading effect on the crypto industry, eroding investor confidence and sparking regulatory scrutiny on stablecoins and crypto as a whole.
Recently, the U.S. Securities and Exchange Commission (SEC) agreed to postpone the fraud trial of Do Kwon, Terraform Labs’ co-founder. Kwon’s legal team had sought this delay, now rescheduling the trial for March 25. Kwon has been in the limelight since the Terra ecosystem’s downfall and his subsequent arrest in Montenegro in March 2023 for using falsified travel documents. The SEC had earlier filed civil charges against Terraform Labs and Kwon in February 2023, alleging a multi-billion dollar crypto asset securities fraud involving tokens formerly known as UST and Terra (LUNA).
Both the United States and South Korea are actively pursuing Kwon’s extradition. If extradited to South Korea, he could face significant legal repercussions, as the alleged crimes predominantly occurred there.
Chris Amani, CEO of Terraform Labs, has voiced his commitment to the Terra community and ecosystem, asserting that the bankruptcy action is integral to addressing the ongoing legal challenges. Amani remains optimistic about overcoming these hurdles, citing the ecosystem’s endurance post the depegging incident and looking forward to a positive outcome in the legal proceedings.