Terraform Labs files for bankruptcy protection in US

[January 22, 2024]  By Mrinmay Dey
 
(Reuters) -Terraform Labs (TFL), the company behind the stablecoin TerraUSD, which collapsed and roiled cryptocurrency markets in 2022, filed for Chapter 11 bankruptcy in the United States, according to court papers filed on Sunday. 

Do Kwon, the cryptocurrency entrepreneur, who created the failed Terra (UST) stablecoin, is taken to court in handcuffs, to face charges of forging official documents, in Podgorica, Montenegro, March 24, 2023. REUTERS/Stevo Vasiljevic/File Photo

Singapore-based Terraform Labs, in a filing with the bankruptcy court in Delaware, listed assets and liabilities in the range of $100-$500 million.

Terraform Labs said it would meet all financial obligations to employees and vendors during the Chapter 11 case without requiring additional financing. It also plans to continue Web3 offerings expansion.

"The filing will allow TFL to execute on its business plan while navigating ongoing legal proceedings, including representative litigation pending in Singapore and U.S. litigation involving the Securities and Exchange Commission (SEC)," Terraform Labs said in a statement.

The SEC's civil case against Terraform and Kwon is linked to the collapse of TerraUSD, a "stablecoin" designed to maintain a constant $1 price, and the more traditional token Luna, which closely associated with TerraUSD.

Recently, a federal judge postponed the trial of the SEC against the company and its co-founder, Do Kwon, over an alleged $40 billion cryptocurrency fraud, to enable Kwon's extradition for his participation.

Kwon and Terraform Labs were held responsible for two cryptocurrencies whose collapse caused turbulence in crypto markets around the world two years ago.

Both cryptocurrencies lost an estimated $40 billion or more when TerraUSD failed to maintain its $1 peg in May 2022.

(Reporting by Mrinmay Dey in Bengaluru; Editing by Rashmi Aich and Dhanya Ann Thoppil)

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