Terraform Labs Files for Bankruptcy Protection
Terraform Labs, the company behind the LUNA token, has filed for bankruptcy protection under Chapter 11 in the US. This move comes ahead of an ongoing trial against Terraform Labs and its co-founder, Do Kwon, by the Securities Exchange and Commission (SEC). The company’s assets and liabilities are estimated to be within the range of $100 to $500 million.
“The filing will allow TFL to execute on its business plan while navigating ongoing legal proceedings, including representative litigation pending in Singapore and U.S. litigation involving the Securities and Exchange Commission (SEC),” stated Terraform Labs.
More Legal Trouble In The USA
Terraform Labs is currently involved in a legal battle with the SEC, which accused the company and Do Kwon of conducting unregistered securities and orchestrating a crypto asset securities fraud. In December last year, the court ruled in favor of the SEC, stating that LUNA and UST are securities. The trial has been postponed to March to await Do Kwon’s participation, who is currently detained. Additionally, Do Kwon faces lawsuits from South Korean investors.
LUNA Craters
Following the bankruptcy announcement, the price of LUNA has dropped nearly 6%. LUNA was issued in May 2022 as Terraform Labs’ effort to recover after a de-pegging event. Two tokens linked to the case, LUNC and USTC, have also seen a price decrease. Terra is a decentralized blockchain platform that provides stablecoins pegged to fiat currencies. LUNA serves as the governance and staking token for the Terra ecosystem.
The Do Kwon Angle
While Do Kwon attempted to revive the ecosystem with LUNA 2.0, the Terra community decided to stick with the old Terra blockchain. The original LUNA and UST were rebranded as LUNC and USTC. In December last year, LUNC and USTC experienced significant rallies. The surge in staking rates and increased utilization of the Terra Classic network indicate a positive sentiment among users, signaling a trajectory toward recovery for the ecosystem.
Hot Take: Terraform Labs Files for Bankruptcy Amid Ongoing Legal Battle
Terraform Labs’ decision to file for bankruptcy protection under Chapter 11 comes as the company faces legal troubles with the SEC. The outcome of the trial could have significant implications for both the company and its co-founder, Do Kwon. The bankruptcy filing allows Terraform Labs to continue its operations while navigating the legal proceedings. However, the drop in LUNA’s price following the announcement highlights the potential impact of these developments on investor confidence. As the trial progresses and more information emerges, it will be crucial to monitor how Terraform Labs addresses its financial obligations and sustains its growth plans in the Web3 space.
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