Terraform Labs files for bankruptcy amid legal challenges and crypto market turmoil

CEO Amanai says bankruptcy filing is essential to pursue future crypto goals

Terraform Labs, the company behind unsuccessful stablecoin TerraUSD, has recently filed for bankruptcy as it grapples with legal challenges from both the Securities and Exchange Commission (SEC) and authorities in Singapore.

The crypto firm, headquartered in Singapore, initiated Chapter 11 bankruptcy proceedings in the US on Sunday, as revealed in court documents. Terraform Labs cited assets in the range of £100 million to £500 million and corresponding liabilities.

In a statement, Chris Amani, CEO of Terraform Labs, highlighted the resilience of the Terra community in the face of challenges. Amani noted that the bankruptcy filing is essential to address legal issues while allowing the company to persist in pursuing collective goals within the crypto ecosystem.

"The Terra community and ecosystem have shown unprecedented resilience in the face of adversity, and this action is necessary to allow us to continue working toward our collective goals while resolving the legal challenges that remain outstanding," said Amani.

Terraform Labs was founded by Do Kwon, currently serving an extended prison sentence in Montenegro and awaiting extradition to either the US or South Korea. Although Kwon no longer leads the firm, Terraform is entangled in legal and financial troubles stemming from the cryptocurrency crash of 2022. The company was responsible for developing the Terra blockchain, supporting the cryptocurrency Luna, and introducing the stablecoin USDTerra. While Luna was designed to fluctuate like typical cryptocurrencies, USDTerra was intended to maintain parity with the US dollar.

Both coins experienced a collapse in May 2022 amidst a broader decline in the cryptocurrency market, resulting in losses exceeding $44 billion in Luna and USDTerra investments. The SEC and Singaporean authorities have initiated legal actions against both Terraform Labs and Kwon.

The Terra network, alongside Kwon, gained prominence during the crypto boom. Terraform Labs had secured a multimillion-dollar sponsorship deal with the Washington Nationals baseball team merely three months prior to the collapse.

Amani acknowledged the challenges faced by the ecosystem and expressed optimism for a successful resolution of the outstanding legal proceedings.

"We have overcome significant challenges before, and, against long odds, the ecosystem survived and even grew in new ways post-depeg; we look forward to the successful resolution of the outstanding legal proceedings," stated Amani.