Crypto Company Terraform Labs Files for Chapter 11 Bankruptcy Protection
Terraform Labs, a collapsed crypto company, has filed for Chapter 11 bankruptcy in the United States. The firm submitted a voluntary petition to the U.S. Bankruptcy Court for the District of Delaware. According to the document filed on Sunday, Terraform Labs has between 100-199 creditors, owns estimated assets between $100,000,001-$500 million, and owes estimated liabilities between $100,000,001-$500 million.
The filing also reveals that Do Kwon, the disgraced founder of Terra, holds 92% of the company’s shares while Daniel Shin, co-founder of Terraform Labs with Kwon, holds 8%. In a press release, Terraform Labs claims that the bankruptcy filing is a strategic step to continue its operations and support for the Terra community and ecosystem.
Resolving Legal Challenges and Moving Forward
Chris Amani, the current CEO of Terraform Labs, states that filing for bankruptcy is necessary to address outstanding legal challenges. Amani emphasizes that this step protects their ability to work with the community on infrastructure, innovative tools and products, and other ecosystem support. He expresses confidence in overcoming challenges and looks forward to successfully resolving legal proceedings.
Founder’s Legal Troubles
Kwon was arrested in Montenegro last year for attempting to travel to Dubai with forged documents. He is wanted by authorities in the US and South Korea for his alleged involvement in the multi-billion-dollar downfall of the Terra ecosystem in 2022.
In December, US District Judge Jed S. Rakoff ruled that both Terraform Labs and Kwon offered and sold unregistered securities through their native token LUNA and decentralized finance token Mirror Protocol (MIR). While Rakoff sided with the US Securities and Exchange Commission (SEC) on the unregistered securities charges, he dismissed the allegations that Terraform Labs offered unregistered security-based swaps.
The fraud claims between the SEC and Terraform Labs will be decided in a jury trial as Rakoff denied both sides’ requests for summary judgment.
Hot Take: Terraform Labs Faces Bankruptcy Amid Legal Troubles
Terraform Labs, a crypto company, has filed for Chapter 11 bankruptcy as it faces legal challenges and alleged involvement in the downfall of the Terra ecosystem. The filing reveals the ownership structure and highlights the company’s intention to continue supporting its community and ecosystem. However, with the ongoing legal proceedings against its founder Do Kwon, including charges of offering unregistered securities, Terraform Labs’ future remains uncertain. The bankruptcy filing may provide an opportunity for resolution, but it also raises questions about the company’s ability to recover and regain trust within the crypto industry.
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