Terraform Labs, the company behind the $40 billion collapse of stablecoin TerraUSD and its sister token Luna, which triggered a “crypto winter” in 2022, has filed for Chapter 11 bankruptcy in the US, according to a court filing on Sunday.
In a filing with the bankruptcy court in Delaware, the Singapore-based company co-founded by cryptocurrency entrepreneur Do Kwon, listed assets and liabilities in the range of $100 million to $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 US litigation involving the Securities and Exchange Commission (SEC),” Terraform Labs said.
In March last year, international crime agency Interpol confirmed the arrest of Mr Kwon, who had been on the run since May 2022, when TerraUSD and sister token Luna collapsed.
The cryptocurrency entrepreneur was arrested in Montenegro along with Terraform’s chief financial officer, Han Chang Joon, and his identity was confirmed through a fingerprint match, Interpol’s national central bureau in Seoul said at the time.
A federal judge has postponed the trial of the SEC against the company and its co-founder over an alleged $40 billion cryptocurrency fraud to enable Mr Kwon's extradition to the US from Montenegro.
The extradition has been delayed as Mr Kwon has appealed the court's decision.
The SEC's civil case against Terraform and Mr Kwon is linked to the collapse of TerraUSD, a “stablecoin” designed to maintain a constant $1 price, and the more traditional token Luna.
Mr Kwon and Terraform Labs were held responsible for the collapse of the two cryptocurrencies, which caused turbulence in cryptocurrency markets around the world two years ago.
Both cryptocurrencies lost about $40 billion or more when TerraUSD failed to maintain its $1 peg.