Terraform Labs declares bankruptcy under Chapter 11

A US federal judge recently stayed the proceedings in the case against Terraform Labs and its founder, Do Kwon. Nevertheless, the organization is presently seeking constitutional protection via Chapter 11. This can be attributed to the company’s assertion that it possesses assets and liabilities totaling between $100 million and $500 million. Conversely, it has been claimed that Do Kwon engaged in a $40 billion crypto fraudulent activity, allegedly serving as the catalyst for the crypto downturn of 2022.

Do Kwon, the founder of Terraform Labs, faces further challenges as a result of the Montenegro legal system’s approval of his extradition to either South Korea or the United States. After a federal judge determined that the Terra LUNA tokens were, in fact, unlisted securities, the US Securities and Exchange Commission (SEC) won the case.

According to court documents made public on January 21, Terraform Labs voluntarily filed an appeal with the US Court in Delaware under Chapter 11 to protect non-individuals from bankruptcy. According to Terraform Labs, its current calculated liabilities range from $100 million to $500 million. In their view, it was insignificant in comparison to the $40 billion that was lost in 2021. Nonetheless, the organization has declared that it will continue to litigate its legal dispute.

The gains of tokens affiliated with Terraform Labs, such as TerraClassicUSD (USTC), Terra LUNA, and Terra Luna Classic, have been nullified subsequent to the Chapter 11 filing. The bankruptcy case is likely to experience a prolonged duration. It is foreseeable that additional losses will be incurred in the coming months as an increasing number of investors liquidate their holdings and shift their focus towards cryptocurrency projects that offer more promising returns. For the purpose of advancing liquidity, Terraform Labs invested $15 million in Terra Luna in November 2023.