Fallen crypto company Terraform Labs files for US bankruptcy, says it will build Web3 business
Do Kwon, who owns a 92 per cent stake in the company, is currently in custody in Montenegro for using falsified documents to leave the US in March.
ADVERTISEMENTTerraform Labs, the company behind the stablecoins TerraUSD and Luna, which collapsed the cryptocurrency industry in 2022, has filed for bankruptcy in the United States.
The Singapore-based company filed a Chapter 11 bankruptcy protection document on Sunday at a court in Delaware.
Terraform Labs’ estimated assets and liabilities range from $100 million (€90 million) to $500 million (€460 million), the document read.
The spectacular crash of its stablecoins wiped out at least $40 billion (€36 billion) in market value when it lost its $1 peg, collapsing the crypto market and causing many to lose their life savings.
The token UST, created by Terraform Labs, was an algorithmic stablecoin, which means that instead of having cash and other assets held in a reserve to back its token, it uses a complex mix of code and Luna to stabilise the process.
Stablecoins claim to be a relatively safe haven in the highly volatile crypto market. But the saga proved algorithmic stablecoins, which are a complicated and lower quality type of banking reserve, are just as volatile as other cryptocurrencies.
Last February, the US Securities and Exchange Commission charged Terraform Labs co-founder Do Kwon with defrauding US investors who bought TerraUSD and Luna. Kwon, who owns a 92 per cent stake in the company, is currently in custody in Montenegro for using falsified documents to leave the US in March.
The company said the filing is “a strategic step that will enable it to continue its operations and support litigation pending in Singapore and US litigation involving the Securities and Exchange Commission”.
The company also said in a statement that it plans to continue building its Web3 business. It launched the crypto wallet Station v3 in January.
“The Terra community and ecosystem have shown unprecedented resilience in the face of adversity, and this action is necessary to allow us to continue working toward our collective goals while resolving the legal challenges that remain outstanding,” said Chris Amani, CEO of Terraform Labs.
