The Latest on Terraform Labs Bankruptcy
Terraform Labs filed for Chapter 11 bankruptcy in the U.S. Bankruptcy Court for the District of Delaware, citing its appeal against the SEC lawsuit. CEO Chris Amani hopes that this move will help them avoid a supersedeas bond and protect their assets. They are all set for their first U.S. bankruptcy hearing today.
The Company’s Bankruptcy Filing
CEO Chris Amani stated that the bankruptcy filing could eliminate a major financial burden, benefiting the company and its community, as their assets and liabilities range from $100 million to $500 million, with 100 to 199 creditors. The SEC had charged Terraform Labs and co-founder Do Kwon with a “multibillion-dollar crypto asset securities fraud” involving their stablecoin TerraClassicUSD and Luna.
SEC’s Ruling and Terraform Labs’ Response
A recent court ruling supported the SEC’s claim, setting the stage for another FTX-like bankruptcy trial, with Judge Jed Rakoff agreeing with the SEC’s claim that Terra had offered unregistered securities. In response, Amani stated that their upcoming appeal challenges the SEC’s authority, arguing that their crypto assets are not securities and that the SEC lacks jurisdiction. The company’s treasury holds about $28 million in Bitcoin, $7 million in various crypto, and around $87 million in Luna.
Kwon’s Trial and Conclusion
This development follows the SEC’s agreement to delay Kwon’s trial to March 25 as he awaits extradition. If sent to South Korea, Kwon faces a potential 40-year jail sentence for alleged crimes committed there. Terraform Labs is using bankruptcy to strengthen its position against the SEC, aiming to navigate the legal storm and protect its interests.
Hot Take
Terraform Labs’ bankruptcy filing could be a strategic move to bolster its position in the SEC lawsuit, but it remains to be seen if it will ultimately help the company navigate the legal challenges it faces.
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