Terraform Labs, the company behind the troubled stablecoin TerraUSD (UST), has filed for bankruptcy in Delaware, USA. This strategic move is intended to address legal challenges while maintaining the company’s objectives. Founded by Do Kwon and based in Singapore, Terraform Labs initiated Chapter 11 bankruptcy protection, revealing assets and liabilities between $100 million and $500 million, with 100 to 199 creditors. Do Kwon holds a 92% majority stake, with South Korean entrepreneur Daniel Shin owning the remainder.
CEO Chris Amani highlighted the importance of this action, stating it allows the Terra community to continue working towards common goals while resolving pending legal issues. The bankruptcy filing comes amidst allegations of fraud and legal battles, with founder Do Kwon and the company facing fraud charges and a lawsuit from the U.S. Securities and Exchange Commission (SEC).
In December, Judge Jed S. Rakoff ruled in favor of the SEC, confirming Terraform Labs and Do Kwon violated securities laws by selling unregistered securities. However, the court dismissed claims related to the company’s transactions involving unregistered security-based swaps. The SEC’s fraud case against Terraform Labs will continue before a jury.
Following these legal developments, Terra’s native cryptocurrency, LUNA, experienced a 6% drop in 24 hours, trading at $0.62. LUNC also saw a 2% decrease, trading at $0.000105. Both tokens’ trading volumes reflected the market’s sensitivity to such significant events.
Terraform Labs’ Chapter 11 bankruptcy filing marks a crucial moment amidst legal challenges, reflecting the crypto market’s response to the company’s strategic measures to navigate through turbulence while aiming to resolve legal complexities and continue collective efforts in the dynamic crypto environment.