Terraform Labs, the developer of the once thriving public blockchain Terra, is currently facing financial fraud lawsuits in both South Korea and the United States. In the midst of these legal disputes, Terraform Labs filed for bankruptcy protection with the United States Bankruptcy Court in Delaware on the 21st, estimating their assets and liabilities to be between 100 million and 500 million dollars.
According to documents submitted last Sunday, Terraform Labs, the developer of the public blockchain Terra, has filed for bankruptcy protection with the United States Bankruptcy Court in Delaware under Chapter 11 of the U.S. Bankruptcy Code. The documents reveal that Terraform Labs’ estimated assets and liabilities range from 100 million to 500 million dollars, with the number of creditors ranging from 100 to 199.
The collapse of the Terra ecosystem’s algorithmic stablecoin UST and native token LUNA in May 2022 resulted in a loss of 40 billion dollars for global investors. Terraform Labs and its founder, Do Kwon, were sued by the SEC last year, accused of orchestrating a fraudulent scheme involving the misrepresentation of cryptocurrencies as securities, in violation of U.S. securities and exchange laws. They are also facing financial crime charges from the South Korean prosecution.
Court documents show that Do Kwon holds approximately 92% of Terraform Labs’ shares, while co-founder Daniel Shin holds the remaining shares of this Singaporean company.
Following the filing for bankruptcy protection, Chris Amani, the current CEO of Terraform Labs, issued a statement stating that Do Kwon is currently facing trial for fraud in the United States and is currently detained in Montenegro. With requests for Do Kwon’s extradition from both South Korea and the United States, Do Kwon’s defense lawyer sought to postpone the SEC’s lawsuit against Terraform Labs and Do Kwon until mid-March. The reason being that Do Kwon wishes to appear in court personally, but he is uncertain about when he will be extradited from Montenegro to the United States, with the earliest estimated arrival being in February or March this year.
The SEC has agreed to the request to postpone the trial date until no earlier than March 18th and hopes to begin the trial on April 15th. U.S. District Court Judge Jed Rakoff will decide whether to change the trial date.
In November of last year, the High Court of Montenegro initially approved the extradition request for Do Kwon, which would be decided by the country’s Minister of Justice whether to extradite him to the United States or South Korea. Do Kwon later successfully appealed and overturned the High Court’s ruling. However, after the High Court ruled the extradition request to be legal on December 29th last year, Do Kwon filed another appeal and is currently awaiting a new ruling from the Court of Appeals.
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