In an effort to stay in business “while resolving the legal challenges that remain outstanding,” Terraform Labs (TFL) has filed for Chapter 11 bankruptcy protection in a Delaware court.
The crypto enterprise has declared that it has assets valued at between $100 million and $500 million plus liabilities in the same amount. In a statement, the Singapore-based company said, “The company remains operational and intends to meet all financial obligations to both employees and vendors during the Chp. 11 case without requiring additional financing.”
Terraform Labs has been struggling ever since its algorithmic stablecoin terraUSD collapsed in May 2022, destroying over $50 billion in value. Since the crash, Terraform has been trying to remain operational by diversifying its investments.
In the past year it has acquired portfolio manager and data provider Pulsar Finance and launched the cross-chain wallet Station v3. By filing for bankruptcy, Terraform hopes it can protect its ability to “continue working with the community on infrastructure, innovative tools and products, and other ecosystem support.”
Its efforts to remain relevant are complicated by the legal cases brought up against it due to the collapse of the Terra/luna ecosystem and by the erratic behaviour of its co-founder. After spending some time on the run, Du Kwon is waiting for extradition to either the U.S. or his home country of South Korea while serving time in a prison in Montenegro for travelling under fake documents.
As the extradition procedures are taking longer than expected, a New York federal judge has agreed to postpone a trial of the Securities and Exchange Commission against TFL and Kwon from Jan. 29 to March 25 so that the infamous former CEO is (hopefully) able to attend court proceedings.
The SEC accuses the parent company of terraUSD of offering and selling crypto securities in unregistered transactions, misrepresenting the stability of its ecosystem stablecoin and issuing false statements regarding Chai, a Korean mobile payment app the company claimed was used to settle transactions.
In late December, the court granted a summary judgment on the claim that the firm and its founders violated U.S. law by failing to register its digital currencies.
Despite the legal hurdles, filing for bankruptcy shows the willingness of the current team to move the company to the next stage. Chris Amani, the current CEO of Terraform Labs, noted that “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.”
