Defunct stablecoin firm Terraform Labs has had its application for Chapter 11 bankruptcy approved by a Delaware court.
Judge Brendan Shannon called the move a “welcome alternative” that avoids complex further litigation over the losses by Terraform’s investors, according to reporting by Reuters.
The company was mainly known for its TerraUSD (UST) stablecoin and accompanying Luna (LUNA) token. Both assets collapsed in May 2022, wiping out $45 billion in market value overnight and causing bankruptcies throughout the crypto industry. It led to a “crypto winter” that lasted well over a year.
Crypto hedge fund Three Arrows Capital (3AC) crashed due to exposure to Terraform’s TerraUSD (UST) and Luna (LUNA) tokens, later leading to extensive litigation on the part of 3AC to receive compensation.
Three Arrows Capital Liquidators File $1.3 Billion Claim Against Terraform Labs
Liquidators of Three Arrows Capital (3AC) are seeking $1.3 billion from TerraForm Labs Pte., the digital assets company co-founded by Do Kwon. The claim relates to losses 3AC experienced following the 2022 crash of the company's TerraUSD (UST) and Luna (LUNA) tokens. According to a document filed in the U.S Bankruptcy Court for the District of Delaware on Aug, 9, the liquidators allege TerraForm Labs "engaged in a scheme to manipulate the open market for LUNA and UST in a manner that artificiall...
The news comes after Terraform filed for Chapter 11 bankruptcy in January 2024. Months later, the firm agreed to pay the Securities and Exchange Commission (SEC) a $4.47 billion settlement after being found guilty of defrauding investors.
Terraform founder and former CEO Do Kwon, was found to have misled investors about the financial stability of his firm, at one point claiming that TerraUSD, which was meant to be pegged to $1, was used by a popular Korean mobile payments app.
Both Kwon and Terraform Labs have been found guilty of civil fraud charges by a U.S. court, though Kwon had denied innocence up until this point.
Terra Founder Do Kwon Files Extradition Appeal, Calls Out 'Bizarre' Legal Readings From Court
The legal brawl in Montenegro over Terraform Labs co-founder Do Kwon isn’t over just yet. Lawyers filed an appeal Tuesday on behalf of Kwon, pushing back against a decision from the High Court of Podgorica. The decision found that conditions had been met earlier this month for Kwon’s extradition—to either the U.S. or South Korea—on charges related to Terra’s collapse. In the appeal, Kwon’s lawyers asserted that laws on legal assistance from other countries in Montenegro had been “interpreted in...
However, the SEC may ultimately collect little from today’s decision as the settlement amount will only be paid to the regulator if Terraform covers all other losses in its liquidation process.
The company estimated it could ultimately pay between $184.5 million and $442.2 million to investors and other stakeholders as part of the liquidation, but the company admitted that the total value of the eligible crypto losses remained “impossible to estimate.”
Do Kwon Arrested in Montenegro, Says Country’s Minister of Interior
Terraform Labs co-founder and CEO Do Hyeong Kwon was reportedly arrested Thursday at an airport in Montenegro’s capital city of Podgorica, according to the country’s Minister of Interior, Filip Adzic. “Montenegrin police have detained a person suspected of being one of the most wanted fugitives, South Korean citizen Do Kwon, co-founder and CEO of Singapore-based Terraform Labs,” he said. Montenegrin authorities are still confirming that the individual arrested is Kwon, based on the claim that th...
Terraform Labs founder Do Kwon spent years evading the authorities while staying in various locations throughout Europe and Asia.
The 33-year-old disgraced entrepreneur was arrested in the European country of Montenegro on false passport charges in December 2023, and both the U.S. and South Korea attempted to extradite him.
Following an August ruling by Montenegro’s Supreme Court, Kwon is now facing extradition to his native South Korea.
Edited by Stacy Elliott.
