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Terraform Labs Files Chapter 11 Bankruptcy Following TerraUSD Collapse

Singapore-based Terraform Labs, the firm behind the stablecoin TerraUSD, has officially filed for Chapter 11 bankruptcy in the United States, according to reports from Reuters. This move comes in the aftermath of the tumultuous events in 2022, where the collapse of TerraUSD sent shockwaves through the cryptocurrency markets.

Court documents submitted on Sunday to the bankruptcy court in Delaware outline the financial landscape of Terraform Labs, citing assets and liabilities within the range of $100 to $500 million. The company has expressed its commitment to meeting all financial obligations to employees and vendors throughout the Chapter 11 proceedings, assuring stakeholders that no additional financing will be necessary. Additionally, Terraform Labs aims to forge ahead with the expansion of its Web3 offerings despite the filing.

In an official statement, Terraform Labs clarified its decision, stating, “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).”

The legal scrutiny from the SEC is centered around Terraform Labs and its co-founder, Do Kwon, concerning the collapse of TerraUSD, a stablecoin designed to maintain a constant $1 value, and the more traditional token Luna, closely linked to TerraUSD.

A recent development in the legal saga is a federal judge’s decision to postpone the SEC’s trial against Terraform Labs and Kwon for an alleged $40 billion cryptocurrency fraud. This delay is attributed to facilitating Kwon’s extradition due to his involvement. The SEC’s legal action stems from the aftermath of the collapse of TerraUSD, which failed to uphold its $1 peg in May 2022.

The downfall of both TerraUSD and Luna in 2022 had far-reaching consequences, causing significant turmoil in global crypto markets and resulting estimated losses of $40 billion.

TerraUSD, a stablecoin designed to maintain a $1 price point, was created by Terraform Labs. The collapse of TerraUSD and Luna, two linked coins, kicked off the so-called “crypto winter,” from which the industry is still battling to recover from.


Information for this story was found via Reuters, Unusual Whales, and the sources mentioned. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.

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