Collapsed Crypto Group Seeks Bankruptcy Protection in US

Singapore company Terraform Labs – the group behind the disastrous stablecoin TerraUSD, which collapsed and crushed crypto markets in mid-2022 – has sought bankruptcy protection in the United States.

Documents filed with a bankruptcy court in Delaware on Sunday show Terraform filed for Chapter 11 bankruptcy protection and listed assets and liabilities allegedly in a range from $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.

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“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 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.