Terra developer Terraform Labs files for Chapter 11 bankruptcy

Terraform Labs, the blockchain company behind the infamous Terra ecosystem, filed for bankruptcy in the US a month after a court ruled that the firm violated US laws.

In court documents filed on January 21, Singapore-based blockchain company Terraform Labs disclosed liabilities of between $100 million and $500 million. Among the creditors with the largest unsecured claims are Nansen CEO Alexander Svanevik of Standard Crypto and Ashley Swaren, TokenTerminal chief commercial officer Rasmus Savander.

The filing will reportedly allow the firm to pursue its business plan while pursuing ongoing litigation, including “representative litigation pending in Singapore and litigation in the United States” involving the U.S. Securities and Exchange Commission (SEC), Terraform Labs said in a statement, Reuters reports.

Following this news, the price of LUNA fell more than 5%, dropping to $0.62, according to data from CoinGecko.

In late December 2023, a US federal judge sided with the SEC in a case against Terraform Labs and its former boss Do Kwon, who has been detained in Montenegro since March 2023 after being convicted of trying to use a fake passport to escape to Dubai on private jet. The US court decision indicated the sale of two unregistered securities by Terraform Labs and Do Kwon, specifically the LUNA, UST and MIR tokens.

Terraform Labs has played a critical role in the Terra ecosystem, developing and supporting various projects and protocols within the ecosystem. One of Terra's key products was its failed algorithmic stablecoin TerraUSD (UST), which was designed to maintain its peg to the US dollar by algorithmically pegging it to LUNA.