- Early last week, a U.S. federal judge postponed the trial of Terraform Labs and Do Kwon to allow extradition.
- Terraform Labs now seeks constitutional protection through Chapter 11 as it has between $100 million and $500 million in assets and liabilities.
- Mr. Do-Kwon was indicted on charges of facilitating a $40 billion cryptocurrency fraud that triggered a cryptocurrency bear market in 2022.
The problems facing Terraform Labs and its founder, Do-kwon Kwon, have grown after the Montenegrin judicial system recently approved extradition to the United States or South Korea. The U.S. Securities and Exchange Commission (SEC) recently gained the upper hand after a federal judge ruled that Terra LUNA tokens are unregistered securities.
Terraform Labs Files for Chapter 11 Bankruptcy Protection
According to court documents released on January 21, Terraform Labs filed a voluntary petition in the U.S. District Court for the District of Delaware to seek Chapter 11 bankruptcy protection as a non-individual. Specifically, Terraforms Labs stated that its estimated debt is between $100 million and $500 million. Likewise, the beleaguered cryptocurrency company noted that it had between $100 million and $500 million in assets, which is a desert drop compared to the $40 billion it lost in the explosion in early 2021.
In a separate statement, Terraform Labs Chris Amani said the latest move will allow the company to continue working to resolve its legal challenges.
market impact
Terraform Labs’ Chapter 11 bankruptcy protection in the United States wiped out all profits made from its tokens, including TerraClassicUSD (USTC), Terra LUNA, and Terra Luna Classic. Since the bankruptcy case is likely to prolong existing lawsuits filed by the U.S., more losses could be expected in the coming months as more investors liquidate their positions in cryptocurrency projects with better fundamentals. Last November, Terraforms Labs invested $15 million in Terra LUNA to improve liquidity.