Terraform Labs, the cryptocurrency firm infamous for the 2022 cryptocrash, has filed for bankruptcy in the United States. This comes as the company faces legal challenges, with its co-founder Do Kwon currently behind bars in Montenegro on charges of forging documents and defrauding investors.
Terraform Labs’ tokens, Luna and TerraUSD, saw a staggering collapse in May, shedding $40 billion in value and contributing significantly to the broader “cryptocrash” that rattled the market. The crash sent shockwaves through the crypto community, prompting investors to withdraw billions from various cryptocurrencies, including Bitcoin, out of fear of a similar downturn.
The once high-flying Luna token, which had gained popularity with its value soaring from $5 to $116 in a short span, plummeted by 99% in just 48 hours. The downfall was triggered by the sharp decline of TerraUSD, a stablecoin designed to maintain a $1 value, which tumbled to approximately $0.02.
Co-founder Do Kwon, once hailed as the “king” by Luna enthusiasts, is currently facing legal troubles on multiple fronts. In addition to the charges in the US, he is also confronted with fraud allegations in South Korea, his home country, and an ongoing legal case in Singapore, where the company is registered.
The bankruptcy filing by Terraform Labs was announced by CEO Chris Amani, who stated, “This action is necessary to allow us to continue working toward our collective goals while resolving the legal challenges that remain outstanding.” The company clarified that it aims to meet all financial obligations to employees and vendors during the Chapter 11 case and does not require additional financing.
Under Chapter 11 bankruptcy, Terraform Labs can continue its operations. The firm, offering blockchain and Web3-related services, has filed the bankruptcy documents in Baltimore, revealing assets ranging from $100 million to $500 million. The documents also indicate that Do Kwon owns 92% of the company’s shares, while co-founder Daniel Hyunsung Shin holds the remaining 8%.
Do Kwon’s legal saga unfolded when he was arrested in Montenegro in March 2023 as he attempted to board a plane to Dubai. In November 2023, a Montenegro court approved his extradition, yet the destination—whether South Korea or the US—remains undecided.
As Terraform Labs navigates through this financial turbulence, the cryptocurrency industry watches closely, contemplating the broader implications of the cryptocrash aftermath and the fate of its once-prominent player.
