Terraform Labs files for Chapter 11 bankruptcy in Delaware
Singapore-based Terraform Labs Pte. Ltd. has filed a voluntary bankruptcy petition in Delaware.
The Board of the company has determined, after consultation with the management and the legal and financial advisors of the company, that it is desirable and in the best interests of the company, its creditors, and other stakeholders that a petition be filed by the company seeking relief under the provisions of chapter 11 of title 11 of the United States Code in the United States Bankruptcy Court for the District of Delaware.
The Board has had the opportunity to consult with the management and the legal and financial advisors of the company to consider, and has considered, the strategic alternatives available to the Company.
At a prior meeting, the Board authorized and approved the appointment of John S. Dubel as an independent member of the Board.
The Board has reviewed and had the opportunity to ask questions about the materials presented by the management and the legal and financial advisors of the company regarding the liabilities and liquidity of the company, the strategic alternatives available to it and the impact of the foregoing on the company’s business.
In February 2023, the Securities and Exchange Commission (SEC) charged Terraform Labs PTE Ltd and Do Hyeong Kwon with orchestrating a multi-billion dollar crypto asset securities fraud involving an algorithmic stablecoin and other crypto asset securities.
According to the SEC’s complaint, from April 2018 until the scheme’s collapse in May 2022, Terraform and Kwon raised billions of dollars from investors by offering and selling an inter-connected suite of crypto asset securities, many in unregistered transactions. These included “mAssets,” security-based swaps designed to pay returns by mirroring the price of stocks of US companies, and Terra USD (UST), a crypto asset security referred to as an “algorithmic stablecoin” that supposedly maintained its peg to the U.S. dollar by being interchangeable for another of the defendants’ crypto asset securities, LUNA.