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The Creator of Disastrous UST Stablecoin Files for Chapter 11 Bankruptcy

Terraform Labs files for bankruptcy, getting closer to turning over one of the darkest pages in the history of crypto

Terraform Labs, known for its involvement in the TerraUSD (UST) stablecoin debacle, has recently sought Chapter 11 bankruptcy protection in the United States. This move, filed at the United States Bankruptcy Court for the District of Delaware, indicates the firm's liabilities and assets ranging between $100 and $500 million. The CEO of Terraform Labs, Chris Amani, emphasized the resilience of the Terra community amidst these challenges.

Amani stated:

 "The Terra community and ecosystem have shown unprecedented resilience in the face of adversity," 

He expressed commitment towards overcoming the ongoing legal hurdles while preserving their collective objectives. 

“We have overcome significant challenges before and, against long odds, the ecosystem survived and even grew in new ways post-depeg; we look forward to the successful resolution of the outstanding legal proceedings.”

This bankruptcy filing follows just days after the postponement of founder Do Kwon's fraud trial by the U.S. Securities and Exchange Commission (SEC), slated now for March 25.

The tumultuous journey of Terraform Labs reached a peak in May 2022, with the collapse of its Terra ecosystem, marking a significant moment in the crypto world. Following the implosion, Do Kwon's whereabouts became a subject of mystery until his arrest in Montenegro in March 2023 for using falsified travel documents. This arrest added another layer to the already complex legal narrative surrounding Kwon and Terraform Labs.

The downfall of TerraUSD and legal repercussions for Do Kwon

The collapse of the Terra ecosystem in May 2022 marked a watershed moment in the crypto industry, particularly for Terraform Labs and its co-founder Do Kwon. The aftermath of this collapse led to heightened scrutiny and legal actions. The U.S. Securities and Exchange Commission (SEC), in February 2023, brought charges against Terraform Labs and Kwon, alleging a “multi-billion dollar crypto asset securities fraud” related to the UST and Terra (LUNA) tokens.

The legal complexities for Kwon further intensified with international implications. Both the United States and South Korea are actively seeking his extradition. The possibility of Kwon facing multiple sentences in both jurisdictions has been a topic of growing speculation. If extradited to South Korea, Kwon could potentially face a severe penalty of up to 40 years, considering the alleged magnitude of crimes committed primarily in that country.