Terraform Labs, the company behind the TerraUSD stablecoin and Luna token, has filed for Chapter 11 bankruptcy protection in the United States. The decision was made in order to address ongoing legal challenges, including a case with the Securities and Exchange Commission (SEC).
The company, which played a key role in the ‘crypto winter’ crisis in 2022, filed for bankruptcy in the Bankruptcy Court of the District of Delaware, stating that it has assets and debts ranging from 100 to 500 million dollars.
CEO Chris Amani stated, “The Terra community and ecosystem have shown incredible resilience in the face of adversity, and this action is necessary for us to continue working towards our goals while resolving outstanding legal issues.”
Following the bankruptcy announcement, Terraform Labs and its co-founder, Do Kwon, were found guilty of defrauding American investors who had purchased TerraUSD and Luna tokens. The SEC trial began on March 25, with Kwon currently in Montenegro awaiting extradition to South Korea.
The SEC Enforcement Director, Gurbir Grewal, commented on the verdict, stating, “Terraform Labs and Kwon misled investors about the stability of the crypto value and the Terra USD stablecoin, as well as the use of the Terraform blockchain in a popular payment application.”
It is important to note that both South Korea and the United States have requested Kwon’s extradition, with a Montenegrin court initially ruling in favor of the United States before overturning the decision in favor of South Korea.