Terra Crypto Has Officially Filed For Chapter 11 Bankruptcy

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Singapore-based Terraform Labs (TFL), creator of digital assets TerraUSD (UST) and Luna, has filed for Chapter 11 bankruptcy in Delaware due to the collapse of its cryptocurrencies in 2022.

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The Chapter 11 filing is described by Terraform Labs as a strategic move to continue operations and support ongoing litigation in Singapore and the U.S. involving the Securities and Exchange Commission (SEC).

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Terraform Labs assures that it will meet all financial obligations to employees and vendors during the Chapter 11 case without requiring additional financing.

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Court documents indicate that Terraform Labs' estimated assets and liabilities fall within the range of $100 million to $500 million, with 100 to 199 creditors.

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Despite the bankruptcy, Terraform Labs expresses plans to expand its Web3 business, highlighted by the recent acquisition of Pulsar Finance and the launch of Station v3, a cryptocurrency wallet.

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Chris Amani, CEO of Terraform Labs, emphasizes the resilience of the Terra community and ecosystem amid challenges, stating that the bankruptcy action is necessary to continue working towards collective goals while addressing outstanding legal challenges.

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Founded in 2018, Terraform Labs suffered a significant loss of at least $40 billion in market value, leading to the collapse of the crypto industry in May 2022.

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The bankruptcy filing coincides with the U.S. SEC's decision to postpone the civil trial against Terraform Labs and co-founder Do Kwon over an alleged $40 billion cryptocurrency fraud.

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The trial has been rescheduled from January 29 to March 25.

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Do Kwon, owning a 92% stake in Terraform Labs, is currently in custody in Montenegro for using falsified travel documents to leave the country in March. 

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His potential extradition to the U.S. or South Korea awaits the final ruling by Montenegro’s Justice Minister in March.