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The challenges facing Terraform Labs and its founder Do Kwon recently escalated after the Montenegro justice system approved the extradition to the United States or South Korea. The United States Securities and Exchange Commission (SEC) recently gained the upper hand after a federal judge ruled that Terra LUNA tokens are unregistered securities
Terraform Labs Files for Chapter 11 Bankruptcy Protection
According to court filings made public on January 21, Terraform Labs filed a voluntary petition for non-individuals filing for bankruptcy protection under Chapter 11 in the United States Court of Delaware. Notably, Terraforms Labs indicated that it has between $100 million to $500 million in estimated liabilities. Similarly, the distressed crypto company noted that it has between $100 million and $500 million in assets, which is a drop in the desert compared h to the $40 billion wiped out during the implosion in early 2021.
In a separate statement, Terraform Labs Chris Amani indicated that the recent action will enable the company to continue working towards resolving its legal challenges.
Market Implication
Following the Terraform Labs’ Chapter 11 bankruptcy protection in the United States, all the gains made by the respective tokens – including TerraClassicUSD (USTC), Terra LUNA, and Terra Luna Classic – had been obliterated. With the bankruptcy case likely to drag the existing case filed by the US much longer, more losses could be expected in the coming months as more investors liquidate their positions for crypto projects with better fundamentals. In November last year, Terraforms Labs injected $15 million into Terra LUNA to improve liquidity.
