Terra, the once-prominent public blockchain developer Terraform Labs, is currently facing financial fraud lawsuits in both South Korea and the United States. In the midst of legal disputes, Terraform Labs filed for bankruptcy protection with the Delaware Bankruptcy Court on the 21st, estimating its assets and liabilities to be between $100 million and $500 million.
(Prior summary:
SEC agrees to Do Kwon’s personal appearance request, postponing the fraud case trial until April)
(Background supplement:
US court rules that LUNA and MIR in the Terra case are “securities”! Do Kwon’s fraud case trial in January)
According to documents submitted last Sunday, Terraform Labs, the developer of the public blockchain Terra, has filed for bankruptcy protection with the Delaware Bankruptcy Court in accordance with Chapter 11 of the US Bankruptcy Code. The documents show that Terraform Labs’ estimated assets and liabilities are both between $100 million and $500 million, and the number of creditors is between 100 and 199.
The collapse of Terra’s ecosystem algorithmic stablecoin UST and native token LUNA in May 2022 resulted in a loss of $40 billion for global investors. Terraform Labs and its founder Do Kwon were sued by the SEC last year, accused of orchestrating fraudulent activities involving “securities” in cryptocurrency, violating US securities and trading laws regarding registration and anti-fraud provisions. They are also facing financial crime charges from the Korean prosecutor.
Court documents show that Do Kwon holds approximately 92% of Terraform Labs’ shares, while Daniel Shin, a co-founder of Terraform Labs, holds the remaining shares of this Singapore company.
After filing for bankruptcy protection, Chris Amani, the current CEO of Terraform Labs, issued a statement, stating that Do Kwon is facing a fraud case trial in the United States. Currently, Do Kwon is being detained in Montenegro, and extradition requests have been made from both South Korea and the United States. Do Kwon’s defense lawyer requested on the 11th to postpone the SEC’s lawsuit against Terraform Labs and Do Kwon until mid-March, as Do Kwon wishes to appear in court in person but is uncertain when he can be extradited from Montenegro to the United States. It is expected that he will arrive in the United States no earlier than February or March this year. On the 15th, the SEC expressed its agreement to Do Kwon’s request to postpone the trial date to no earlier than March 18th and expects the trial to begin on April 15th. The decision to change the trial date will be made by Judge Jed Rakoff of the US District Court.
Further reading:
SEC agrees to Do Kwon’s personal appearance request, postponing the fraud case trial until April
In November of last year, the Montenegrin High Court 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, but after the High Court ruled the extradition request legal on December 29th, Do Kwon filed another appeal and is currently awaiting a new ruling from the Appeals Court.
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