Operator of stablecoin TerraUSD applies for bankruptcy protection! Still unwilling to give up its Web3 products.

Zhitong App has learned that Terraform Labs, the company behind the failed stablecoins TerraUSD (UST-USD) and Luna (LUNA-USD), has filed for Chapter 11 bankruptcy in the United States. After the decoupling of the stablecoins from the US dollar, both TerraUSD and Luna collapsed in 2022, resulting in a loss of approximately $40 billion for the two cryptocurrencies. It is understood that the company is the main entity behind the "TerraUSD" collapse that occurred in May 2022. In May 2022, the stablecoin TerraUSD, which was pegged to the US dollar, and its sister token Terra (LUNA) both collapsed, causing a major cryptocurrency crash with losses of up to $40 billion. In detail, the collapse of TerraUSD and Luna in May 2022 wiped out a combined market value of at least $40 billion for the two stablecoins and had a significant impact on the cryptocurrency industry. The US Securities and Exchange Commission (SEC) has accused the company and its co-founder Do Kwon of defrauding US investors who purchased TerraUSD and Luna, with Kwon holding a significant stake in Terraform Labs. Do Kwon was later arrested in Montenegro for using forged travel documents and may be extradited to the United States or South Korea to face charges related to the cryptocurrency collapse. The Singapore-based cryptocurrency company stated that the bankruptcy filing is a strategic step that allows it to continue operating and support ongoing litigation in Singapore and the United States, particularly involving the SEC. Terraform Labs recently acquired Pulsar Finance and launched a cryptocurrency wallet, indicating the company's efforts to persevere in the industry. Court documents show that Terraform listed assets and liabilities worth approximately $100 million to $500 million. According to media reports, the company plans to fulfill all financial obligations to employees and suppliers in the Chapter 11 bankruptcy proceedings without the need for additional financing. The company stated, "This bankruptcy filing will enable Terraform to execute its business plan while addressing ongoing legal actions, including pending representative actions in Singapore and the lawsuit initiated by the SEC." The company added that it plans to continue expanding the market size of its Web3 products in the future. Terraform is expected to face a class-action lawsuit in Singapore, with investors claiming a total loss of approximately $57 million during the TerraUSD (UST-USD) crash. Terraform also faces fraud charges brought by the SEC, but the company is attempting to dismiss the charges on the grounds that TerraUSD (UST-USD) does not fall within the regulatory jurisdiction of the agency as it is not a security product. However, at the end of last year, a US judge ruled that Terraform failed to successfully register its other cryptocurrency stablecoins, Luna and Mirror Protocol USD, as securities. However, Terraform has repeatedly claimed that its issuance of TerraUSD and other cryptocurrencies are definitely not securities.