Terraform Labs Pte. Ltd., the company behind the algorithmic stablecoin TerraUSD and Luna, filed for Chapter 11 bankruptcy in the U.S. Bankruptcy Court for the District of Delaware on January 21, as indicated on the court’s website. The move follows the collapse of TerraUSD and Luna in May 2022 and subsequent fraud charges by the U.S. Securities and Exchange Commission (SEC) against the firm and its former CEO, Kwon Do-hyeong, in February 2023.
The bankruptcy filing reveals that Terraform Labs estimates its liabilities and assets to be within the range of $100 million to $500 million. The company sees this legal measure as an opportunity to address ongoing legal issues, including the SEC lawsuit and pending litigation in Singapore.
According to media reports, Chris Amani, the current CEO of Terraform Labs, stated in a release, “This step protects our ability to continue working with the community on infrastructure, innovative tools and products, and other ecosystem support.”
Kwon Do-hyeong, the founder of Terraform Labs, was arrested in March of the previous year in Montenegro for attempting to travel with false documents. While awaiting extradition from Montenegro, the U.S. District Court for the Southern District of New York delayed the SEC trial against Terraform Labs and Kwon to late March, following a request from Kwon.
Earlier SuperCryptoNews had reported that Kwon had moved approximately $29 million in digital coins from an entity linked to Terraform Labs following his arrest. South Korean prosecutors have accused him of transferring these funds personally or at his request before the collapse of the blockchain project.
The fate of the cryptocurrencies taken from Kwon’s cryptographic wallet remains uncertain. Authorities are actively attempting to locate the funds, including an alleged siphoning of another 10,000 BTC or more. Further investigations suggest that Kwon and his associates may have deposited at least $13 million with Signum Bank, a Swiss bank specializing in cryptocurrencies.
Amidst Kwon’s ongoing trial in Montenegro, there are reports of distressing conditions in the country’s prisons. Despite a brief moment of hope when Kwon and his accomplice were granted permission for release on bail, a higher court later reversed the decision.
Suspicions also arise concerning Kwon potentially hiding $100 million in a Swiss bank account. Authorities are diligently investigating these allegations as they work to unravel the complex web of financial activities involving the crypto entrepreneur. If convicted, Kwon could face trials in both South Korea and the United States, potentially leading to a lengthy prison sentence. Extradition requests from both countries are pending as the legal saga unfolds.
