Terraform Labs Files For Bankruptcy, Pushes Ahead With Web3 Plans

Written by

Joanna K

Editor

Terraform Labs, the Do Kwon-founded firm responsible for the crashed TerraUSD (UST) stablecoin, has filed a voluntary petition in the US for Chapter 11 bankruptcy, according to documents filed yesterday, 21 January. 

The May 2022 collapse of the dollar-pegged TerraUSD stablecoin and LUNA token, spearheaded by Terraform Labs, caused billions in losses for investors and sent shockwaves through the crypto market. 

Now, the embattled firm has filed for Chapter 11 bankruptcy with $100-$500million in assets and liabilities.

Singapore-based Terraform Labs filed for the protection at the United States Bankruptcy Court for the District of Delaware. At present, Kwon is currently facing the prospect of a class-action suit in Singapore along with a trial in the States from the Securities and Exchange Commission (SEC).

Terraform Labs Chapter 11 bankruptcy filing

The SEC's fraud trial against Terraform Labs and Do Kwon linked to the 2022 $40billion crypto crash when TerraUSD lost its $1 peg has been postponed to facilitate Kwon's extradition. 

Terraform Labs' Web3 plans

In a statement, Terraform Labs said: "The filing will allow TFL to execute on its business plan while navigating ongoing legal proceedings, including representative litigation pending in Singapore and U.S. litigation involving the Securities and Exchange Commission (SEC)."

Terraform Labs' unsecured creditor list includes Standard Crypto and TQ Ventures, two US-based firms recognized within the digital asset and venture capital industries. 

The company said it aims to fulfil financial obligations to the relevant creditors without asking for additional financing, while also forging ahead with its Web3 expansion plans.

Meanwhile, in December 2023, Kwon and Terraform Labs lost a LUNA and MIR suit when a US judge ruled that they are securities.

Terra Classic (LUNC) price

At the time of writing on 22 Janaury, the price of Terra Classic (LUNC), the rebrand of the original LUNA token, is trading at $0.0001017, down 8.4% in the past 24 hours according to latest data from CoinMarketCap.

Terra Classic (LUNC) daily chart