Terraform Labs Declare Bankruptcy After Luna and TerraUSD Crash

New York, NY January 30, 2024 – Terraform Labs, the company behind the cryptocurrency Luna and stablecoin TerraUSD (UST), filed for Chapter 11 bankruptcy in the United States District Court for the District of Delaware on Sunday, January 21. ¹

Details of the filing can be seen here.

Terra was a blockchain payment platform designed for algorithmic stablecoins. Launched in 2018 by Terraform Labs, a startup co-founded by Do Kwon and Daniel Shin, the project gained prominence through its Terra Stablecoin and the accompanying Luna reserve asset cryptocurrency.

However, in May 2022, the Terra blockchain faced a temporary suspension following the collapse of the stablecoin TerraUSD (UST) and Luna, resulting in an estimated loss of $45 billion in market capitalization within a week.

The collapse prompted investigations by regulators in both the US and South Korea.

In March 2023, Mr. Kwon was apprehended in Montenegro while attempting to board a flight to Dubai.

Subsequently, three months later, he was convicted of document forgery, a charge he contested, and received a prison sentence.

Han Chang-joon, the former finance officer of Terraform Labs, faced a similar fate, being sentenced to jail for similar charges.

Despite having notable supporters like Michael Novogratz, the Terra ecosystem proved unsustainable amidst intense downward pressure on crypto markets. Its demise preceded the bankruptcy of institutions like BlockFi and Celsius.

Despite the bankruptcy filing, Terraform Labs stated its intention to continue operating and supporting ongoing litigation in both the US and Singapore.

Facing SEC charges, Terraform is listed as a creditor in its bankruptcy filing, with estimated liabilities and assets between $100 million and $500 million.

Sources