The Blubber

Terraform Labs files Chapter 11 bankruptcy in Delaware, per Reuters.

Terraform Labs, the firm responsible for the stablecoin TerraUSD, whose collapse shook the cryptocurrency markets in 2022, has filed for Chapter 11 bankruptcy in the United States, as per court documents submitted on Sunday.

In a filing to the bankruptcy court in Delaware, the Singapore-based Terraform Labs provided details of assets and liabilities within the range of $100-$500 million.

Terraform Labs has assured that it will fulfill all financial obligations to its employees and vendors during the Chapter 11 proceedings without the need for additional financing. Additionally, the company intends to proceed with the expansion of its Web3 offerings.

In a statement, Terraform Labs explained, “The filing will allow TFL to execute on its business plan while navigating ongoing legal proceedings, including representative litigation pending in Singapore and U.S. litigation involving the Securities and Exchange Commission (SEC).”

The SEC's legal action against Terraform and its co-founder, Do Kwon, is connected to the collapse of TerraUSD, a stablecoin designed to maintain a constant $1 value, and the more conventional token Luna, closely associated with TerraUSD.

Recently, a federal judge postponed the SEC's trial against the company and Kwon for an alleged $40 billion cryptocurrency fraud, to facilitate Kwon's extradition due to his involvement.

Kwon and Terraform Labs were held accountable for the downfall of two cryptocurrencies that caused turmoil in global crypto markets two years ago, resulting in an estimated loss of $40 billion or more when TerraUSD failed to maintain its $1 peg in May 2022.