Terraform Labs Submits Bankruptcy Protection Application

Terraform Labs Submits Bankruptcy Protection Application

Terraform Labs, the developer behind the once-prominent projects LUNA and the UST stablecoin, which experienced a downfall during the recent market downtrend in May 2022, has officially filed for bankruptcy in the Delaware court in the United States.

In the bankruptcy filing, the company disclosed that both its assets and liabilities fall within the range of $100 million to $500 million.

Terraform Labs files for bankruptcy protection in US https://t.co/u6chgA5AfK pic.twitter.com/uoykjtorhc

— Reuters (@Reuters) January 22, 2024

This bankruptcy announcement comes as Terraform Labs prepares to enter court proceedings against the U.S. Securities and Exchange Commission (SEC). According to reports from azc.news, the U.S. court has sided with the SEC, recognizing the argument that LUNA and UST are securities. Consequently, Terraform Labs is accused of violating U.S. law by offering these tokens to U.S. investors without SEC approval.

However, the recent court session has been postponed to late March to await the participation of Terraform Labs’ co-founder, Do Kwon, who is currently detained in Montenegro with an unclear release date.

Initially, Terraform Labs attributed the collapse of LUNA-UST to external actors, alleging foul play by investment funds such as Citadel Securities. However, they failed to provide specific evidence and faced immediate rebuttal.

Apart from Terraform Labs, another closely associated investment fund with the LUNA-UST model is Jump Crypto, and its leader Kanav Kariya is also under SEC investigation for allegations of market manipulation and misleading investors about the true nature of the project.

The chart of LUNA following the news of Terraform Labs filing for bankruptcy protection

The 1-hour chart of the LUNA/USDT pair on the Tradingview at 03:27 AM on January 22, 2024.