By Michael Scott
The Singapore-based firm behind the infamous stablecoin TerraUSD and identified with Do Kwon reportedly sought bankruptcy protection in a Sunday filing before the US court. Terraform Labs revealed in the January 21 filing that it carries assets and liabilities estimated between $100 million and $500 million.
The UST stablecoin issuer sought Chapter 11 bankruptcy protection on Sunday, January, filing in the Delaware court. Explaining the move, Terraform Labs chief executive Chris Amani hailed the unprecedented resilience of the Terra community and ecosystem amid the prolonged adversity.
Terraforms Eyes Emergence from Bankruptcy
Amani labeled the filing for Chapter 11 protection as a critical action to guarantee its continued work to realize the collective goals. The executive indicated that Terraform Labs is committed to resolving the unresolved legal challenges.
Amani recalled Terraform Labs’ capability to resolve the significant challenges that befell the company. The statement adds that the UST issuer overcame the long odds that worsened post de-pegging.
Amani expressed optimism that Terraform will resolve the outstanding legal proceedings. The pronouncement follows the court filing on Sunday, where the firm indicated matching liabilities and assets in the $100M-$500M range.
The firm filed for bankruptcy protection four days after the US Securities and Exchange Commission (SEC) granted the request to postpone Do Kwon’s fraud trial till March 25. The decision arose from Kwon’s legal team’s request to delay the proceedings momentarily.
Do Kwon’s Terra Money ecosystem suffered a sudden implosion in May 2022. Shortly before the firm collapsed, co-founder Known went missing only for his arrest on March 23 in Montenegro. The arrest occurred in his attempted use of doctored documentation to exit the country.
The court filing comes after the delayed start of the case leveled against Terraform Labs in February last year. The US securities watchdog alleged Kwon and Terraform executed a multi-billion fraud via crypto assets.
Do Kwon to Face Multiple Sentences
The civil charges involve a multi-billion fraud involving crypto asset securities linked to the Terra (LUNA) and UST tokens. The regulator alleged that Kwon and Terraform Labs were responsible for the collapse of two cryptocurrencies.
The SEC’s civil suit links Terraform Labs and its co-founder to the TerraUSD collapse. The token was a stablecoin initially designed to retain $1 and exhibited close association with the firm’s token LUNA.
The collapse of LUNA and UST triggered a market-wide turbulence that plunged the crypto sector into a prolonged winter. The regulator illustrated that Kwon and Terraform oversaw the crypto loss estimated at $40 billion when TerraUSD lost its $1 peg back in May 2022.
The latest development comes at a time when South Korea and US authorities seek Kwon’s extradition. The attempts prompt growing speculation that Kwon will face multiple sentences in the two jurisdictions.
One litigation analyst indicated that extraditing Kwon to South Korea could see him face a 40-year jail sentence. The analyst indicated that Kwon orchestrated most of the fraud within the East Asia country.
Terraform Labs Optimistic of Navigating Legal Proceedings
A recent decision by a federal judge led to the postponement of the trial initiated by SEC against SEC. The regulator agreed to delay the trial to facilitate Do Kwon’s highly sought extradition for his involvement in the $40 billion crypto fraud.
The Singapore firm disclosed in the filing that it intends to meet the financial obligations to the vendors and employees during the Chapter 11 proceeding. However, the firm rules out the necessity of additional financing, affirming it plans to explore expansion in its Web3 offerings.
Terraform Labs’ subsequent statement expresses optimism that the Chapter 11 protection will help it execute business plans. It assures its ability to navigate the ongoing legal proceedings in Singapore and the US.
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