Terraform Labs Files for Chapter 11 Bankruptcy Protection in Delaware
On Sunday, January 21, the Singaporean crypto firm Terraform Labs filed for Chapter 11 of Bankruptcy protection at a court in Delaware. From 2022, the Terraform top-level management has been in hot waters following the collapse of the Terra ecosystem that plunged most of the investors into financial woes.
In the previous bull market, the Terraform team led by co-founder Do Kwon deployed unique marketing tactics to promote TerraUSD (UST).
Overview of Crashing Down of Terra Ecosystem
After an intense exercise to hype UST, the Terraform team reached a substantial customer base and promised the investors that the stablecoin would consistently maintain a $1 peg despite the uncertainty in the crypto sector.
Apart from this, Do Kwon promised the investors to increase their value and a 20% interest rate on UST investment. However, based on the volatile nature of the crypto market, the Terra ecosystem entered a death spiral after the stablecoin UST and the sister token LUNA failed to maintain the $1 peg against the US dollar.
The unexpected crash of Terra exposed the crypto investors to a loss of over $ 40 billion. Not only did the failed crypto investment expose the investors to losses, but the co-founder whine over the collapse of his “greatest invention.”
Terraform Labs Battle Legal Charges
Following the collapse of the Terra ecosystem, the regulators struck the lighting rod on Do Kwon. A review of the recent court report demonstrated that Do Kwon has been charged with several criminal counts, including wire fraud and conspiracy of fraud.
The report indicated that the disgraced crypto investor is serving four months imprisonment in Montenegro for forging travel documents. Also, the US Securities and Exchange Commission (SEC) accused Terraform Labs of offering unregistered securities.
The SEC claimed that Do Kwon operated a multimillion-dollar crypto investment, violating existing securities laws. Based on the severity of the criminal charges, the US urged the court to allow Do Kwon to be deported to the region for further legal action and questioning.
On the other hand, South Korea demanded that Do Kwon be extradited to the country for further criminal proceedings. Based on the Do Kwon case, the prosecutors argued that most crimes were committed in South Korea.
Therefore, if the court in Montenegro allows Do Kwon’s extradition to South Korea, the 31-year crypto investor will receive a 40-year jail term. Despite the legal action against Terraform’s former CEO and other executives, the LUNA and UST investors have been demanding for repayment.
Upon contacting the Terraform chief executive, Chris Amani, to deliberate on the proposed repayment plans, the CEO claimed that the ongoing legal charges against Do Kwon delayed refunding plans to UST and LUNA victims.
This implies that the company will repay the affected customers despite the legal action against Terraform Labs. According to the January 21 court filing, the Terraform team claimed that proposed restructuring plans would help the company meet its financial obligations without depending on external funding.
Terraform Labs Files for Bankruptcy Protection
In the report, the Terraform team estimated that its liabilities and assets ranged between $100 and $500 million. The Terraform underlined the significance of the restructuring process to the company.
Beyond this, the Terraform team plan to develop Web3-inspired products to meet the growing market demand. The report stated that the restructuring process aims to expand Terraform’s revenue-generating stream to enable the firm to meet its financial needs, including employees’ wages and vendors.
A statement from the Terraform CEO demonstrated that the company has been resilient amid the heightened regulatory adversities. The executive confirmed that the proposed restructuring was necessary for the company to pursue its shared goals.
Amani believes the restructuring will enable the embattled crypto investors and Terraform to navigate the complex legal structure and litigation processes. He recognized that the company overcame most of the complex challenges, including the 2022 depegging of UST.
The CEO confessed that even after the crashing of Terra ecosystem, the company attained exponential growth and sustained its operations. He believed Terraform would settle the ongoing legal charges in the coming days.
Tokenhell produces content exposure for over 5,000 crypto companies and you can be one of them too! Contact at info@tokenhell.com if you have any questions. Cryptocurrencies are highly volatile, conduct your own research before making any investment decisions. Some of the posts on this website are guest posts or paid posts that are not written by Tokenhell authors (namely Crypto Cable , Sponsored Articles and Press Release content) and the views expressed in these types of posts do not reflect the views of this website. Tokenhell is not responsible for the content, accuracy, quality, advertising, products or any other content or banners (ad space) posted on the site. Read full terms and conditions / disclaimer.
