Cryptocurrency firm Terraform Labs files for Chapter 11 bankruptcy

Terraform Labs, the entity behind the troubled stablecoin TerraUSD, has filed for Chapter 11 bankruptcy protection in the United States. The filing, submitted on Sunday and recorded in the bankruptcy court in Delaware, reveals that the Singapore-based company lists its assets and liabilities within the $100-$500 million range.

Terraform Labs has been at the centre of controversy, particularly linked to the collapse of TerraUSD, a stablecoin designed to maintain a constant $1 value. The collapse of TerraUSD had far-reaching implications, causing turbulence in cryptocurrency markets globally in 2022.

Amid bankruptcy filing, a federal judge recently postponed the trial of the US Securities and Exchange Commission (SEC) against Terraform Labs and its co-founder, Do Kwon. The SEC's civil case revolves around an alleged $40 billion cryptocurrency fraud, holding Kwon and Terraform Labs responsible for the collapse of two cryptocurrencies that sent shockwaves through the crypto markets.

The SEC's scrutiny is closely tied to the downfall of TerraUSD and the more traditional token Luna, which had strong associations with TerraUSD. Both cryptocurrencies collectively lost an estimated $40 billion or more when TerraUSD failed to maintain its $1 peg in May 2022.

This bankruptcy filing adds another layer of complexity to Terraform Labs' already challenging situation. As the legal battles unfold, the cryptocurrency industry watches closely to assess the broader implications and potential regulatory responses to such developments in the digital asset space.

(With Reuters inputs)