Terraform Labs Pte., a company specializing in digital assets and co-founded by Do Kwon, has filed for Chapter 11 bankruptcy protection in the United States.
The specified firm’s estimated assets and liabilities range from $100 million to $500 million. The number of creditors ranges from 100 to 199. The relevant information is contained in court documents filed in Delaware on Sunday, January 21.
Do Kwon is currently wanted in the United States and South Korea after at least $40 billion was lost in 2022 due to the collapse of his TerraUSD stablecoin and the Luna token and the situation in the $2 trillion crypto market deteriorated significantly. This collapse contributed to the start of several bankruptcies and signaled serious risks in the digital asset market.
TerraUSD failed to maintain its peg to $1 in May 2022.
Do Kwon is in custody in Montenegro, where he was detained for using a fake passport. In January, his lawyer announced the likelihood of extradition of the Terraform Labs co-founder to the United States by mid-March. Do Kwon may face an American court on charges of organizing a major fraud. In court documents, he is identified as a 92% shareholder of Terraform Labs. These documents also indicate that another South Korean entrepreneur, Daniel Shin, owns the remaining part of the company registered in Singapore.
If Do Kwon is extradited to South Korea, he could face a 40-year prison sentence. He committed most of the crimes in this country. Dan Sunghan, the head of the prosecutor’s office in South Korea, said in May last year that investigating the specified case in this state is the most effective way to achieve justice.
Montenegro Justice Minister Marko Kevac said that the decision on extradition will be made based on several factors, including the place and time of the crime. Another important aspect will be the severity of the crime.
The Terraform Labs community and ecosystem, against a background of extremely adverse circumstances, has demonstrated what can be described as an example of unprecedented resilience at dire straits. Chris Amani, the company’s chief executive officer, said that the bankruptcy procedure is necessary to continue working to achieve collective goals and simultaneously solve the legal problems that the brand continues to face.
Terraform Labs also announced its readiness to fulfill all financial obligations to employees and suppliers during the Chapter 11 case, without requiring additional funding. Moreover, the company intends to continue expanding its Web3 offerings.
Do Kwon and Terraform Labs also sued the Securities and Exchange Commission. In December, United States District Judge Jed S. Rakoff ruled in favor of the regulator, recognizing as fair, and justified the claim that the company is responsible for the sale of unregistered securities. At the same time, the judge did not agree with the statements that Terraform Labs made transactions on swaps based on securities.
Jed S. Rakoff said the SEC’s fraud case against Terraform should be tried by a jury.
As we have reported earlier, Chinese Shadow Bank Zhongzhi Files for Bankruptcy.