Do Kwon’s Terraform Labs [TFL], the firm behind one of the most significant crypto crashes in recent history, has filed for bankruptcy protection in the United States. The filing, dated January 21, reveals that the company is facing estimated liabilities and assets ranging between $100 million and $500 million. The move comes as TFL grapples with legal challenges, including ongoing litigation in Singapore and a case with the U.S. Securities and Exchange Commission [SEC].
Chris Amani, the CEO of Terraform Labs, emphasized the resilience of the Terra community and ecosystem in the face of adversity. Amani stated that the bankruptcy filing is a necessary step to address legal challenges while enabling the company to pursue its collective goals.
Terraform Labs plans to execute its business plan during the bankruptcy proceedings, allowing it to navigate the representative litigation in Singapore and the SEC-related legal issues in the United States. The company, co-founded by Do Kwon and Daniel Shin, gained prominence for its Terra blockchain protocol and payment platform for algorithmic stablecoins.
The troubles for TFL began in 2022 when its cryptocurrency token, Luna, and stablecoin, TerraUSD [UST] experienced a catastrophic collapse. UST broke its peg to the U.S. dollar, plummeting to 10 cents, while Luna fell from an all-time high of $119.51 to “virtually zero.” The crash erased nearly $45 billion of market capitalization within a week.
Do Kwon Braces for March Trial
Legal actions followed the collapse, with jurisdictions in Korea, Singapore, and the United States initiating proceedings against Do Kwon and his team. Both the South Korean and American governments have formally requested Kwon’s extradition.
In a recent development, the SEC won a partial victory in its lawsuit against Terraform Labs. U.S. District Court Judge Jed Rakoff ruled that TFL and co-founder Do Hyeong Kwon violated securities laws by offering and selling unregistered digital tokens. The SEC has agreed to postpone Do Kwon’s civil trial, allowing for his extradition and participation in the proceedings.
The delay, requested by Kwon’s lawyer, has been deemed justified by the SEC, with the trial now expected to take place no earlier than March 18. Importantly, there won’t be separate trials for Terraform and Kwon to avoid imposing an unnecessary burden on whistleblowers and retail investors.