Terraform Labs Files for Bankruptcy in the USA After a Crypto Crash of Over $50 Billion
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Once hailed as the fastest-growing crypto company in the world, Singapore-based Terraform Labs has just filed for Chapter 11 bankruptcy in the USA. The move comes in the middle of an ongoing litigation with the SEC. It also comes months after the arrest of its founder, Do Kwon, who’s currently in jail in Montenegro.
Terraform is behind one of the biggest crypto crashes in history. Its token, TerraUSD, collapsed in 2022, causing a massive crypto market crash. It’s safe to say that the industry needed time to recover, but the Terraform bankruptcy filing has the potential to upset it all again.
Terraform is Seeking Bankruptcy Protection
The crypto company filed for Chapter 11 bankruptcy on Sunday. It shared assets with the court in Delaware in the range of $100-$500 million. Its number of creditors may be as high as 199. All of the company’s funds will be available for distribution to unsecured creditors, while Terraform Labs seeks bankruptcy protection in the USA.
So far, Terraform has pledged to meet all financial obligations to its clients. It’s not actively looking for additional financing. The company is expected to continue expanding its Web3 offerings, and with the filing, it will be able to execute its business plans. That could prove tricky as it navigates legal waters in the USA and litigation pending in Singapore. On top of that, the company is clashing with the SEC since the TerraUSD crash, and that might be the last nail in its coffin.
Terraform’s founder, Do Kwon, who was charged by the SEC with defrauding investors, is currently in jail in Montenegro. He was found hiding there in late 2022, and arrested months later in 2023. The company’s other founder, Daniel Shin, was indicted in South Korea last year. It remains to be seen when Do Know will be extradited and where. A Montenegrin court approved his extradition in November 2023, but it has yet to decide if he flies to the USA or South Korea.
‘THE’ Crypto Crash
Terraform’s name become known around the world in December 2021. At that point, its token—Luna—began its ascent. It was worth $5 at the time, but quickly rose to $116—its all-time high—in April 2022. Kwon was hailed as the king of crypto, while fans of Luna were called Lunatics. It didn’t take long before the scam was discovered. Luna and its sister coin TerraUSD crashed in just a couple of days, losing over 99% of their value in the vicinity of $53 billion.
Over $400 billion was wiped off the market, causing one of the worst crypto market crashes. That time has passed now and the market has recovered nicely, but it made many investors be more aware of the potential risks.
More than a year and half later, Terraform Labs has finally filed for bankruptcy. All of its chief officers were arrested and charged, with only the king of crypto remaining on the list. He’ll be extradited sooner rather than later, and that will finally be the end of Terraform’s tragic story.
