Key Insights:
After playing a cat and mouse chase with several agencies for nearly 20 months, Do Kwon and his Terraform Labs have finally filed for a Chapter – 11 Bankruptcy with the Delaware authorities on Jan 21, 2024.
The company was behind the infamous USTC and LUNA which failed in 2022 and is estimated to have wiped more than $64 Billion in assets worldwide.
Terraform Labs has finally filed for bankruptcy in Delaware as per the United States Chapter-11 Bankruptcy filings. The company cited a mismatch in its assets and liabilities.
As per the filings, the assets of the company amount to $100 million while its liabilities are nearly $500 million. The number of credits is estimated to be between 100 and 199.
The legal proceedings were done by Chris Amani, CEO of the Terraform Labs and has the nod from the directors of the company.
Despite all this, the company recently acquired Pulsar Finance, a cross-chain portfolio management company.
The founder Do-Kwon is currently under custody in Montenegro for falsifying travel related documents. His extradition still remains in question and can be only
Recently, a US court has also ruled that the cryptocurrency MIR and LUNA issued by the company are to be considered as securities.
There is also a similar legal case against Terraform where it faces a class action lawsuit in Singapore by Julius Moreno Beltran and Douglas Gan, both of whom are parties to a consortium that claim to have lost $57 million. The case was filed in September 2023.
The company also previously faced investigations from South Korean authorities right after the fall of LUNA and USTC but these failed to find anything conclusive.
In February 2023, the SEC charged the Terraform Labs and its then CEO Do Kwon with criminal charges including a multi-billion dollar scam between April 2018 – May 2022.
They were charged with defrauding the investors in what the SEC called as "crypto schemes".
Terraform Labs had issued two cryptocurrencies prior to 2022 which were LUNA and an algorithmic stablecoin USTC dependent on LUNA.
Between May 9 and 15, 2022, the entire system collapsed due to a fatal error in design. When USTC de-pegged from its dollar mark, probably due to shorting, it scared its holders.
Both these cryptos were designed in a way that if someone burns USTC, they would get LUNA in their wallets.
Panicked traders who saw LUNA as a form of capital protection began withdrawing en masse. Combined with the shorting witnessed in LUNA, the total ecosystem collapsed within a few days.
The blockchain was halted on May 15 and again resumed on May 27 as a new blockchain, but that failed to gather momentum.
At the end it was assessed that nearly $64 billion were lost from the crypto markets.
The event led to further assessment of crypto markets and could have been a triggering point for further downfalls and the overall Crypto Winter.
The stablecoin USTC by Terra Labs still commands the 9th position among top 10 stablecoins. It still has a market cap of roughly $220 million despite witnessing a 98% fall in value.
During the press time, the cryptocurrency was trading around 2.4 cents a piece.
Disclaimer: Voice of Crypto aims to deliver accurate and up-to-date information, but it will not be responsible for any missing facts or inaccurate information. Cryptocurrencies are highly volatile financial assets, so research and make your own financial decisions.