Terraform Labs, currently entangled in a securities fraud case with the U.S. Securities & Exchange Commission [SEC], sees a potential lifeline in its recent bankruptcy filing. The firm, accused of conducting an unregistered securities offering for U.S. citizens, faces a crucial trial scheduled for March. Chris Amani, the head of company operations, conveyed in a court filing that the financial burden of the litigation was insurmountable, stating, “The exact size of a money judgment remains unknown, but it could very well outstrip the debtor’s assets.”
To pursue a critical “do-or-die” appeal, the firm would be required to post a bond equivalent to 110% of the total judgment value. However, Terraform Labs posits that filing for Chapter 11 bankruptcy would allow them to proceed with the appeal without having to provide a bond. Amani highlighted the significance of Chapter 11 protection, asserting that without it, the company might be forced to liquidate after the trial.
Despite the challenging circumstances, Terraform Labs remains resolute in its stance that the SEC lacks jurisdiction over the firm, arguing that its cryptocurrency tokens do not fall under the category of “securities.”
Terraform Debts
In terms of financial standing, the company, responsible for one of the most substantial crypto crashes in recent history, unveiled a snapshot in its recent court filing. The disclosure includes an estimated $28 million in Bitcoin, $7 million in various cryptocurrencies, and roughly $87 million in its proprietary token, Luna. The bankruptcy protection filing, dated January 21, reveals the company’s estimated liabilities and assets, ranging between $100 million and $500 million.
Terraform Labs, founded by Do Kwon and Daniel Shin, achieved prominence for its Terra blockchain protocol and algorithmic stablecoin payment platform before experiencing a dramatic crash that wiped out nearly $45 billion of market capitalization within a week. Amidst the backdrop of the challenging legal landscape, Chris Amani, the CEO, emphasized the resilience of the Terra community and ecosystem, framing the bankruptcy filing as a strategic move to address legal challenges while enabling the pursuit of collective goals.