Terraform files for bankruptcy protections ahead of trial

The company called the filing a “strategic step” ahead of its trial

article-image

dRender/Shutterstock and Adobe modified by Blockworks

share

Terraform Labs, the blockchain development firm behind the Terra ecosystem and its algorithmic stablecoin, filed for bankruptcy protection in the US on Sunday.

The company filed the Chapter 11 paperwork in Delaware.

A press release accompanying the filing said that the move was “a strategic step that will enable it to continue its operations and support for the Terra community and ecosystem.”

The company is currently locked in a legal battle with the US Securities and Exchange Commission, with the regulator accusing both Terraform and founder Kwon of selling unregistered securities and fraud. Earlier this month, a judge sided with some of the SEC’s accusations labeling UST, LUNA and MIR securities. 

“The filing will allow TFL to execute on its business plan while navigating ongoing legal proceedings, including representative litigation pending in Singapore and US litigation involving the Securities and Exchange Commission,” the press release said.

Read more: Where things stand: The SEC vs Do Kwon and Terraform Labs

Kwon is currently detained in Montenegro after facing a short jail sentence for forging documents last year. Kwon, according to the bankruptcy paperwork, is the majority shareholder of the company with 92%. 

The former CEO is at the center of two extradition requests: one from the US and another from South Korea. In December, following reports that Montengrian authorities planned to extradite Kwon to the US over his home country, Bloomberg reported that both countries asked for an extension on his extradition

Terraform’s original trial date was set for Jan. 29. Earlier this month, the trial was delayed until March to give Kwon time to potentially attend the trial if he’s extradited. 

Judge Jed Rakoff, who’s overseeing the case, warned that the delay sought by Kwon’s counsel doesn’t “guarantee” that Kwon “will be released in time.”

The bankruptcy paperwork reveals that the company has between 100-199 creditors. It also has liabilities between $100 million to $500 million. However, the company believes that funds will be made available for distribution to unsecured creditors. 

Terraform CEO Chris Amani added that the company will continue to work “on infrastructure, innovative tools and products and other ecosystem support.”

Co-founder Daniel Hyunsong Shin owns the other 8% of shares. Shin was indicted by South Korean authorities back in April and also faced a trial for his role in the collapse of the TerraUSD stablecoin.

The collapse of Terra’s algorithmic stablecoin in 2022 led to roughly $800 billion being wiped from crypto markets. It also led to multiple bankruptcies from crypto hedge fund Three Arrows Capital to lenders like Celsius and Voyager.


Start your day with top crypto insights from David Canellis and Katherine Ross. Subscribe to the Empire newsletter.

Explore the growing intersection between crypto, macroeconomics, policy and finance with Ben Strack, Casey Wagner and Felix Jauvin. Subscribe to the On the Margin newsletter.

The Lightspeed newsletter is all things Solana, in your inbox, every day. Subscribe to daily Solana news from Jack Kubinec and Jeff Albus.

Tags

Upcoming Events

Salt Lake City, UT

MON - TUES, OCT. 7 - 8, 2024

Blockworks and Bankless in collaboration with buidlbox are excited to announce the second installment of the Permissionless Hackathon – taking place October 7-8 in Salt Lake City, Utah. We’ve partnered with buidlbox to bring together the brightest minds in crypto for […]

Salt Lake City, UT

WED - FRI, OCTOBER 9 - 11, 2024

Pack your bags, anon — we’re heading west! Join us in the beautiful Salt Lake City for the third installment of Permissionless. Come for the alpha, stay for the fresh air. Permissionless III promises unforgettable panels, killer networking opportunities, and mountains […]

recent research

Research Report Templates.png

Research

ZKPs enable efficient offchain transaction processing and validation, resulting in increased throughput and reduced fees. Solana's ZK Compression leverages ZKPs to minimize onchain storage costs, while Sui's zkLogin streamlines user onboarding by replacing complex key management with familiar OAuth credentials.

article-image

North Korea suspected in breach of Indian exchange’s multisig wallet

article-image

Plus, Sanctum’s CLOUD token has officially launched — but not without problems

article-image

It’s not yet clear whether Donald Trump is pumping bitcoin. But an unofficial memecoin is still seeing benefit.

article-image

StarkWare takes a step towards making StarkNet for Bitcoin

article-image

The numbers point to one conclusion: Risk is back, or at least it was during the first half of the year