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Terraform Labs, the company behind the Terra blockchain, has filed for bankruptcy in the United States Bankruptcy Court for the District of Delaware. Terraform Labs owns LUNC, LUNA, and a stablecoin called UST.
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The bankruptcy filing caused a sell-off in Bitcoin, which fell below $41,000. LUNC and LUNA, on the other hand, saw a surge of nearly 7%.
The company’s assets are estimated to be between $100 million and $500 million.
The bankruptcy filing was made in Delaware, a state known for its efficient and quick handling of bankruptcy cases. The company’s collapse was further exacerbated by the Terra LUNA crash in 2022.
According to official documents, the company’s debts are estimated to be between $100 million and $500 million, which is roughly equal to its assets.
Terraform Labs CEO Chris Amani said in a statement after the bankruptcy filing:
The bankruptcy filing will greatly facilitate the company’s handling of legal matters, including the SEC lawsuit and a lawsuit pending in Singapore. It will also facilitate our work on new projects that we will create with our community to develop solid infrastructure and innovation.
Do Kwon, one of the founders of Terraform Labs and the project’s most well-known figure, is currently in prison in Montenegro for fraud. Kwon is expected to be extradited to the United States soon and the SEC lawsuit to begin there in March.
Legal proceedings are also ongoing in Singapore and South Korea, and there are many lawsuits filed against Do Kwon in the United States in his name.
The Beginning of the Collapse in Terraform Labs
In May 2022, the project’s algorithmic stablecoin UST collapsed, and the subsequent sell-offs spread like a domino effect to other crypto companies. Bitcoin, which was above $30,000 at the beginning of May, fell to $17,000 in June.
Impact of the Bankruptcy Filing
The bankruptcy filing is a significant development for the cryptocurrency industry. It is the first major bankruptcy filing by a cryptocurrency company.
The filing is likely to have a negative impact on the price of Bitcoin and other cryptocurrencies. It is also likely to lead to increased scrutiny of the cryptocurrency industry by regulators.
It remains to be seen how the bankruptcy filing will ultimately impact Terraform Labs and its community.