Do Kwon's Terraform Labs Files for Bankruptcy Protection in US

CryptoNews.com

2024-01-21 21:51:00

Hongji Feng

Last updated:

January 22, 2024 00:43 EST | 2 min read

Source: DALL·ETerraform Labs, the issuer of the collapsed stablecoin TerraUSD (UST), has filed for Chapter 11 bankruptcy protection in the United States.

The filing by Terraform Labs was officially submitted to the U.S. Bankruptcy Court for the District of Delaware. This action marks a significant legal step for the company in dealing with the repercussions of its financial struggles and the collapse of its cryptocurrency assets.

Terraform Labs’ Bankruptcy Restructuring Plan

In its Chapter 11 filing, Terraform Labs disclosed a range of both assets and liabilities estimated between $100 million to $500 million. The filing, necessitated by the significant financial troubles following the collapse of its digital currencies, is aimed at restructuring the company’s debts.

Terraform Labs has committed to fulfilling its financial responsibilities to both its employees and vendors. The company has indicated that this will be achievable without the need for external financial support. Additionally, Terraform Labs has announced its intention to continue the expansion of its web3 offerings, despite the ongoing bankruptcy process.

“The filing will allow TFL to ute 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),” said the company in a statement.

The legal troubles for Terraform Labs and its co-founder, Do Kwon, escalated with the collapse of its two main cryptocurrencies, TerraUSD and Luna, in May 2022. The failure of TerraUSD to maintain its peg to the U.S. dollar triggered a market-wide crisis, leading to a significant loss in value.

The SEC has been pursuing a civil case against Terraform Labs and Kwon, linking their operations to an alleged $40 billion cryptocurrency fraud. This legal battle, among other challenges, contributed to the company’s decision to file for bankruptcy.

Previously, the SEC agreed to postpone Kwon’s trial to mid-March due to Kwon’s extradition request. Kwon’s legal team filed an appeal against the Montenegro High Court’s decision to uphold the extradition requests from both the United States and South Korea.

Kwon’s Lawyer Argues for Extradition to South Korea

In addition, Do Kwon’s legal representative in Montenegro Goran Rodic has presented an argument favoring Kwon’s extradition to South Korea over the United States.

Citing the European Convention on the Extradition of Criminals, the bilateral agreement between Montenegro and the United States, and local laws regarding international legal support, Rodic asserted that Kwon, being a Korean citizen, should be sent back to South Korea.

“100% sure that he should be repatriated,” said Rodic.

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