Do Kwon’s Terraform Labs Pte., a digital asset concern and once a prominent player in the cryptocurrency world, has come crashing down. The company has filed for Chapter 11 bankruptcy protection in the United States.
This dramatic fall follows the massive collapse of its flagship stablecoin, TerraUSD (UST), and its companion token, Terra (LUNA), in May 2022. This event is a major blow to the entire crypto market, as it has wiped out billions of dollars in investor funds and exposed the underlying vulnerabilities within the crypto landscape.
Here are some key points from the events that happened to date:
- Terraform Labs, the company behind the now-defunct TerraUSD and LUNA tokens, filed for Chapter 11 bankruptcy.
- The company’s estimated liabilities and assets are both between $100 million and $500 million.
- The number of its creditors is in the range of 100 to 199
- Do Kwon, co-founder of Terraform Labs, faces fraud charges in both the US and South Korea.
- Do Kwon is currently in custody in Montenegro, waiting for extradition proceedings.
- The SEC has successfully sued Terraform Labs for selling unregistered securities.
- The future of Terraform Labs and the legal fate of Do Kwon remain uncertain.
Facing Legal Battles
The downfall of Terraform Labs has come at a time when there is a focus on increasing scrutiny from regulators. Both the US Securities and Exchange Commission and South Korean authorities have accused the company and its co-founder Do Kwon of orchestrating a multi-billion dollar crypto asset securities fraud.
The SEC lawsuit was partially successful, whereby a judge passed the ruling that Terraform Labs had sold unregistered securities. However, the allegations of illegal security-based swaps were dismissed, while it was also stated that a jury would hear the SEC’s case against Terraform.
Do Kwon’s Future is Uncertain
Do Kwon, the crypto creator, is currently in custody in Montenegro after attempting to flee with falsified travel documents. He is facing extradition requests from both the US and South Korea.
Back in 2022, the collapse of TerraUSD and Luna caused a huge mess in the entire crypto market, losing people at least $40 billion! Not only that, it caused many other crypto companies to go bankrupt and showed everyone how risky this crypto world can be. Now, both South Korea and the USA want Kwon to answer for what happened.
He could face a long time in jail if found guilty! If extradited to South Korea, he could face up to forty years in prison. Meanwhile, in the US, a trial for his alleged fraud is set for March 2024.
Looking Ahead
Terraform Labs’ bankruptcy filing can be considered a significant chapter in the ongoing account of the Terra system’s collapse. Although the company has made bold claims of resilience and expressed its commitment to resolving legal challenges, it remains unclear if a successful reorganization can occur. Meanwhile, the legal proceedings against Do Kwon will continue to develop, while the industry is expecting significant consequences for him and the future of crypto regulations.
Celine Brooks is a renowned journalist and author specializing in cryptocurrency and blockchain technology. She holds a Master’s degree in Economics from Harvard University and is very passionate about Crypto. Celine regularly hosts webinars and workshops, sharing her insights and forecasts about the evolving digital currency landscape. She is also an active contributor to several leading financial and tech publications, where she breaks down complex crypto trends into understandable insights for everyday investors.