Terraform Labs, the company responsible for the stablecoin TerraUSD, has filed for Chapter 11 bankruptcy in the United States. The Singapore-based company submitted court papers on Sunday, listing assets and liabilities within the range of $100-$500 million, according to news reports by Reuters.
Despite the bankruptcy filing, Terraform Labs stated that it intends to meet all financial obligations to employees and vendors during the Chapter 11 case without requiring additional financing. The company also expressed its commitment to continuing the expansion of its Web3 offerings.
In a statement, Terraform Labs mentioned that the filing would enable the company to execute its business plan while navigating ongoing legal proceedings. This includes representative litigation pending in Singapore and U.S. litigation involving the Securities and Exchange Commission (SEC).
The SEC's civil case against Terraform Labs and its co-founder, Do Kwon, is linked to the collapse of TerraUSD, a stablecoin designed to maintain a constant $1 price, and the more traditional token Luna, closely associated with TerraUSD. The collapse of TerraUSD in May 2022 resulted in a loss of an estimated $40 billion or more, causing turbulence in cryptocurrency markets worldwide.
A federal judge recently postponed the trial of the SEC's case against Terraform Labs and Do Kwon over an alleged $40 billion cryptocurrency fraud. The postponement was to allow for Kwon's extradition for his participation in the case.
Despite the bankruptcy filing, Terraform Labs aims to proceed with its business plan and Web3 offerings expansion. The company is facing legal challenges, and the bankruptcy proceedings will play a role in managing its financial obligations while addressing ongoing legal issues.