Terraform Labs Struggles: Filing for Chapter 11 Bankruptcy Terraform Labs Struggles: Filing for Chapter 11 Bankruptcy

Published On: January 22, 2024 4:46 am

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The tumultuous journey of Terraform Labs, the parent company of the ill-fated cryptocurrencies TerraUSD (UST-USD) and Luna (LUNA-USD), has come to a head as it has filed for Chapter 11 bankruptcy protection in the U.S.

Notorious for the collapse of TerraUSD (UST-USD) in 2022, which led to the destabilization of both UST-USD and Luna, resulting in a staggering loss of around $40 billion, Terraform Labs is now faced with a monumental financial reckoning.

According to a court filing, Terraform has disclosed assets and liabilities in the range of $100 million to $500 million each. With the intention to honor all financial commitments to its personnel and suppliers during the Chapter 11 proceedings, the company has made it clear that it will navigate through this fiscal maelstrom without seeking additional financial backing, as per Reuters.

“By filing for Chapter 11 bankruptcy, Terraform is taking the necessary steps to implement its business strategy while managing the ongoing legal battles, including pertinent litigation in Singapore and the U.S. involving the Securities and Exchange Commission,” the company stated. Furthermore, it has avowed to persist with the expansion of its Web3 offerings despite the current predicament.

In Singapore, Terraform is anticipated to encounter a class-action lawsuit from investors who collectively claim to have incurred losses amounting to $57 million during the collapse of TerraUSD (UST-USD).

Additionally, the company is grappling with fraud accusations brought forth by the U.S. SEC. In an attempt to dismiss these charges, Terraform argued that TerraUSD (UST-USD) does not fall within the purview of the regulatory body as it is not categorized as a security.

However, in a significant setback for Terraform, a U.S. judge ruled last year that the company had failed to register Luna (LUNA-USD) and Mirror Protocol USD (MIR-USD), another crypto it issues, as securities. Despite Terraform’s persistent claims that TerraUSD (UST-USD) and its other tokens are not securities, the ruling stands as a formidable challenge for the beleaguered company.