Crypto Company Terraform Labs Files for Chapter 11 Bankruptcy Protection
Collapsed crypto company Terraform Labs has filed for Chapter 11 bankruptcy in the United States.
The firm submitted a voluntary petition to the U.S. Bankruptcy Court for the District of Delaware.
The document, which was filed on Sunday, indicates Terraform Labs has between 100-199 creditors, owns between $100,000,001-$500 million in estimated assets, and owes between $100,000,001-$500 million in estimated liabilities.
The document also indicates disgraced Terra founder Do Kwon holds 92% of the company’s shares, while Daniel Shin, who co-founded Terraform Labs with Kwon, holds 8%.
In a press release, the company claims the bankruptcy filing is a “strategic step that will enable it to continue its operations and support for the Terra community and ecosystem.”
Current Terraform Labs chief executive Chris Amani says the Terra community and ecosystem have “shown unprecedented resilience” and argues that filing for bankruptcy is necessary for resolving outstanding legal challenges.
“This step protects our ability to continue working with the community on infrastructure, innovative tools and products, and other ecosystem support. 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.”
Kwon was arrested in Montenegro last year after attempting to board a flight to Dubai with forged documents. He is wanted by authorities in both the US and South Korea for his alleged role in the multi-billion-dollar downfall of the Terra (LUNA) ecosystem in 2022.
In December, US District Judge Jed S. Rakoff ruled that Terraform Labs and Kwon offered and sold the company’s native token, LUNA, and its decentralized finance (DeFi) token Mirror Protocol (MIR) as unregistered securities.
While the judge sided with the U.S. Securities and Exchange Commission (SEC) regarding the unregistered securities charges, he did side with Terraform Labs regarding the regulator’s allegations that the company offered unregistered security-based swaps, tossing that charge.
The SEC and Terraform Labs had both requested summary judgment in an ongoing fraud case. Rakoff denied both sides’ requests for summary judgment on the fraud claims, which will be decided at a jury trial.
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Author: Conor Devitt
