Singapore-based crypto company Terraform Labs has filed for bankruptcy protection in the U.S.
The filing, made on January 21 at the U.S. Bankruptcy Court in Delaware, indicates estimated assets and liabilities in the range of $100 million to $500 million.
Terraform explained that filing for bankruptcy would enable the company to carry out its business plan amid ongoing legal challenges in both Singapore and the U.S.
During the bankruptcy proceedings, Terraform aims to meet all financial commitments to employees and vendors without needing additional financing. Additionally, the company intends to persist in expanding its web3 offerings.
“The Terra community and ecosystem have shown unprecedented resilience in the face of adversity, and this action is necessary to allow us to continue working toward our collective goals while resolving the legal challenges that remain outstanding,” said Terraform Labs CEO Chris Amani.
Less than two years ago, the collapse of the company responsible for the now-discontinued TerraUSD (UST) stablecoin resulted in substantial losses for investors worldwide. UST suffered a significant loss of about $40 billion in market value, impacting holders due to its deviation from its $1 peg.
“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,” said Armani.
Terraform faced legal issues after the collapse of digital currencies UST and Terra (LUNA) in May 2022. The founder, Do Kwon, was arrested in Montenegro last year for using forged documents and sentenced to four months in prison. South Korea and the U.S. are seeking his extradition.
The bankruptcy filing comes recently after the U.S. Securities and Exchange Commission (SEC) agreed to postpone Kwon’s upcoming fraud trial to March 25 after receiving a request from his legal team to delay the proceedings.
The SEC agreed to a request by Kwon’s lawyers to delay the trial until after his extradition. Despite being ready for the trial scheduled on January 29, the SEC, in a filing on January 15, supported a request to postpone the start date to no earlier than March 18.
“The SEC joins in Kwon’s request for a modest adjournment so that he may participate in the trial,” the filing reads. “If the trial date is adjourned, the SEC respectfully requests that trial commence on April 15, 2024.”
Kwon’s legal team is managing the extradition challenges while he remains in Montenegro, where he was arrested in March 2023.
While the SEC agreed to consider delaying the trial date, it disagreed with separating Kwon’s case from the commission’s case against Terraform. Both were accused in the SEC charges filed in February 2023, claiming they were involved in a “multi-billion dollar crypto asset securities fraud” linked to the tokens formerly known as TerraUSD (UST) and LUNA.
“Holding two trials would unnecessarily require witnesses, including SEC whistleblowers and retail investors with limited financial means, to testify twice about identical facts in different trials,” said the SEC.
If Kwon is extradited to South Korea, he might confront a 40-year prison term in the country.
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