Singapore-based Terraform Labs (TFL), the company behind digital assets TerraUSD (UST) and Luna, has found itself in a precarious position. The company has decided to take Chapter 11 bankruptcy as a strategic step to continue operations and support ongoing litigation.
“This filing is a strategic step that will enable us to continue our operations and support litigation as we work towards our goals,” said Chris Amani, CEO of Terraform Labs.
In its statement, Terraform Labs has also promised to meet all financial obligations to employees and vendors during this process without seeking additional financing. This move comes after their digital assets, which were once valued at billions of dollars, collapsed in 2022.
According to court documents filed today, Terraform Labs’ assets and liabilities are estimated to be between $100 million and $500 million, with a list of creditors totaling between 100 and 199.
Despite the recent setback, Terraform Labs remains committed to expanding its Web3 business. In fact, they recently acquired Pulsar Finance, a cross-chain portfolio manager and data provider, and released their cryptocurrency wallet, Station v3, earlier this month.
“The Terra community and ecosystem have shown great resilience amidst challenging times,” said Chris Amani. “This necessary action will allow us to continue working towards our collective goals while addressing ongoing legal challenges.”
Founded in 2018, Terraform Labs has had a significant impact on the crypto industry, but not in the way they had hoped. The company’s downfall has been attributed to their alleged involvement in a $40 billion cryptocurrency fraud.
The bankruptcy filing comes just four days after the U.S. Securities and Exchange Commission (SEC) agreed to delay the civil trial against Do Kwon, a co-founder of Terraform Labs, and his alleged involvement in the fraud.
In February of last year, the SEC charged Kwon and Terraform Labs with defrauding U.S. investors who purchased Terra USD and Luna. At the time of the charges, Kwon owned a 92% stake in the company, while fellow co-founder Daniel Shin held the remaining 8%.
It seems that the fate of Terraform Labs now lies in the hands of the court as the company navigates through this difficult time. More updates are sure to follow as the story unfolds.
