South Korean entrepreneur Do Kwon, the founder of Terraform Labs, has filed for bankruptcy protection in the United States, as his cryptocurrencies, TerraUSD and Luna, experienced a significant crash in 2022. The collapse of Terraform Labs resulted in the loss of approximately $40 billion in investments and caused widespread losses in the global crypto market, estimated at over $400 billion.
Do Kwon, who co-founded Terraform in 2018, was arrested in Montenegro last year and is awaiting extradition to either the United States or South Korea. He faces fraud charges in both countries relating to the crash.
The bankruptcy filing will enable Terraform to continue operating according to its business plan while navigating ongoing legal proceedings, including representative litigation in Singapore and litigation involving the US Securities and Exchange Commission. The company issued a statement assuring its commitment to meeting all financial obligations to employees and vendors throughout the Chapter 11 case, without requiring additional financing.
In the court filing made in Delaware, Terraform listed its assets and liabilities in the range of $100 million to $500 million. Do Kwon holds 92 percent of Terraform’s shares, according to the filing.
Last year, the US Securities and Exchange Commission charged Do Kwon and Terraform with orchestrating a multi-billion dollar crypto asset securities fraud.
TerraUSD, marketed as a stablecoin pegged to the US dollar to minimize volatility, and its counterpart Luna suffered a catastrophic decline in May 2022, despite substantial investments and global attention. Experts have likened Do Kwon’s activities to a Ponzi scheme, leading to substantial losses for many investors.
Following the crash, Do Kwon fled South Korea and spent months on the run. He was eventually apprehended in Montenegro while attempting to board a flight using counterfeit Costa Rican travel documents.
In November, a court ruled that Do Kwon would be extradited to either the United States or South Korea, pending the decision of Montenegro’s Minister of Justice.
1. Source: Coherent Market Insights, Public sources, Desk research
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