Terraform Labs files for bankruptcy following crash of its stablecoins in 2022

Terraform Labs filed for chapter 11 bankruptcy protection Sunday, following the collapse of its TerraUSD and Luna crypto coins in 2022.

In a statement, Singapore-based Terraform said it took the “strategic step” of filing in Delaware bankruptcy court so it could continue to operate while resolving its “legal challenges.”

Terraform co-founder Do Kwon has been charged by the U.S. Securities and Exchange Commission with defrauding investors out of billions of dollars.

“We have overcome significant challenges before and, against long odds, the ecosystem survived and even grew in new ways … we look forward to the successful resolution of the outstanding legal proceedings,” Terraform Chief Executive Chris Amani said in a statement.

In May 2022, the TerraUSD and Luna stablecoins collapsed, wiping out more than $40 billion in market capitalization and helping kick off a wider crypto crash.

In its filing Sunday, Terraform cited estimated assets between $100 million and $500 million, and the same range in liabilities.

Last week, a federal judge postponed Kwon’s trial until April, to allow time for his extradition to the U.S. from Montenegro, where he fled after South Korea issued an arrest warrant for him in late 2022.

Terraform’s other co-founder, Daniel Shin, was indicted by South Korea in April 2023.

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