South Korean entrepreneur Do Kwon’s Terraform Labs, whose cryptocurrencies crashed dramatically in 2022, is seeking bankruptcy protection in the United States, according to court documents filed on Sunday.
The collapse of the Singapore-based firm’s TerraUSD and Luna wiped out about $40 billion in investments and caused larger losses in the global crypto market estimated at more than $400 billion.
Kwon, who founded Terraform in 2018, was arrested last year in Montenegro and is awaiting extradition to the United States or South Korea.
He faces fraud charges in both countries related to the crash.
The bankruptcy filing will allow Terraform “to execute its business plan while navigating ongoing legal proceedings, including representative litigation pending in Singapore and litigation in the US involving the Securities and Exchange Commission,” the company said in a statement.
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Terraform “intends to meet all financial obligations to employees and vendors in the Chapter 11 case and does not require additional financing to do so.”
The company’s court filing in the US state of Delaware listed both its assets and liabilities in the range of $100 million to $500 million.
Kwon owns 92 percent of Terraform’s stock, according to the filing.
The US SEC last year charged both Kwon and Terraform with “orchestrating a multi-billion dollar crypto-asset securities fraud”.
The company’s TerraUSD was marketed as a “stablecoin,” a token that is pegged to stable assets like the U.S. dollar to avoid drastic fluctuations.
But despite billions in investment and global hype, TerraUSD and its sister Luna entered a death spiral in May 2022.
Experts said Kwon had set up a glorified Ponzi scheme in which many investors lost their savings.
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He fled South Korea before the crash and spent months on the run, eventually ending up in custody in Montenegro after trying to board a flight with fake Costa Rican travel documents.
A court said in November that he would be extradited to the United States or South Korea pending a decision by Montenegro’s justice minister.
Source: AFP