Terraform Labs, a well-known cryptocurrency startup, has formally filed for bankruptcy in the United States. The statement surprised the cryptocurrency community and investors, sparking fears about the company’s future and the possible influence on the market as a whole.
In May, the tokens of Terraform Labs experienced a significant downturn, witnessing a staggering $40 billion loss in value. This downturn played a role in the widely termed “cryptocrash” of 2022.
In a bankruptcy court filing in Delaware, Singapore-based Terraform Labs cited assets and liabilities ranging from $100 million to $500 million.
Terraform Labs stated that the company will pay all financial obligations to workers and vendors during the Chapter 11 litigation without requesting extra funding. Additionally, it intends to expand its Web3 capabilities.
Terraform Labs can continue to operate after declaring bankruptcy under Chapter 11.
Co-founder Do Kwon is currently jailed in Montenegro after being convicted of document falsification. He is now awaiting extradition on allegations of cheating investors brought by US regulators. Furthermore, he is facing fraud claims in his own country, South Korea, and may face extradition procedures there as well. Simultaneously, a third court lawsuit is pending in Singapore, the company’s formal domicile.
“The filing will allow TFL to execute 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),” Terraform Labs said in a statement.
Mr Kwon was detained in Montenegro in March 2023 as he attempted to catch a flight to Dubai.Three months later, he was convicted of fabricating documents, which he disputed, and sentenced to prison.
Han Chang-joon, Terraform Labs’ former financial officer, was sentenced to jail after being found guilty of the same allegations.
According to Reuters, authorities discovered doctored Costa Rican passports and a different set of Belgian passports in their luggage.
In November 2023, a Montenegrin court accepted his extradition but has yet to decide whether it will go to South Korea or the United States.
As Terraform Labs navigates the bankruptcy protection process in the U.S., the global crypto community braces for the potential aftershocks. The story is unfolding rapidly, and stakeholders are advised to stay informed as more details emerge regarding the causes and implications of Terraform Labs’ unprecedented decision.