Singapore-based cryptocurrency firm Terraform Labs, the developer behind the collapsed algorithmic stablecoin TerraUSD, has filed for Chapter 11 bankruptcy protection in the US, with New York law firm Weil, Gotshal & Manges providing representation.
According to the filing, Terraform Labs has between 100 and 199 creditors, estimated assets between $100 million and $500 million, and the same estimated amount of liabilities.
The largest unsecured claim not held by an insider belongs to Pittsburgh law firm K&L Gates.
Terraform Labs is entangled in litigation both in Singapore and the US, where it faces a civil case from the US Securities and Exchange Commission (SEC) following the dramatic collapse of TerraUSD and its associated token, LUNA.
Once pivotal cogs in the cryptocurrency machine, these cryptocurrencies experienced a catastrophic fall in May 2022, wiping out an estimated $40 billion in value and sending shockwaves through the global cryptocurrency sector.
Terraform Labs’ co-founder Do Kwon, who became an international pariah in the fallout of TerraUSD’s collapse, is facing charges of wire fraud and securities fraud.
He was arrested by authorities in Montenegro in March 2023 after attempting to board a flight to Dubai from Montenegro's capital Podgorica, alongside Han Chang-joon, Terraform Labs' former finance officer.
Kwon faces extradition to South Korea – his home country – when he finishes his four-month prison term in the Balkan country for document forgery.
UST was designed to maintain a firm peg to the US dollar, thereby providing stability in the volatile crypto markets.
However, the algorithm underpinning UST's value failed catastrophically. In May 2022, LUNA and UST, which had a combined market value of approximately US$45 billion, became virtually worthless within a week, causing massive losses for investors and severely tarnishing Kwon's reputation.
The collapse of Terraform Labs is seen as a pivotal event that precipitated broader turmoil in the cryptocurrency market, including the liquidation of major crypto hedge fund Three Arrows Capital.