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Crypto's Terraform files for bankruptcy as Do Kwon awaits fate

Bloomberg • 2 min read
Crypto's Terraform files for bankruptcy as Do Kwon awaits fate
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The Terraform Labs digital-asset business co-founded by Do Kwon filed for Chapter 11 bankruptcy protection in the US.

The company’s estimated assets and liabilities are both in the range of US$100 million to US$500 million, while the number of creditors is between 100 and 199, according to court documents filed in Delaware on Sunday.

Kwon is wanted by both South Korea and the US after the 2022 collapse of his TerraUSD stablecoin and Luna token wiped out at least US$40 billion and exacerbated a US$2 trillion crypto-market rout. The ructions contributed to a spate of bankruptcies and exposed deep risks in the digital asset market.

The former crypto mogul is in custody in Montenegro for travelling on a fake passport. Kwon could be extradited to the US by mid-March to face charges that he orchestrated a major fraud, his lawyer said earlier this month.

The court documents listed Kwon as the 92% shareholder of Terraform Labs. Another South Korean entrepreneur, Daniel Shin, owns the remainder of the Singapore-incorporated company, according to the papers.

“The Terra community and ecosystem have shown unprecedented resilience in the face of adversity, and this action is necessary to allow us to continue working toward our collective goals while resolving the legal challenges that remain outstanding,” Terraform Labs Chief Executive Officer Chris Amani said in a statement.

See also: Rise of Telegram-friendly blockchain spurs talk of crypto super-app

Aside from being indicted on fraud charges, Kwon and Terraform Labs are also being sued by the Securities and Exchange Commission. 

Last month, US District Judge Jed S. Rakoff ruled in favor of the US regulator, agreeing that Terraform Labs is liable for selling unregistered securities, but threw out allegations that the company had made transactions in unregistered security-based swaps. In the ruling, Rakoff said the SEC’s fraud case against Terraform must be tried by a jury.

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