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Crypto firm Terraform Labs files for Chapter 11 bankruptcy

Crypto firm Terraform Labs files for Chapter 11 bankruptcy

Luna Token News Today

TerraformLabs, the creator of TerraUSD (UST) and Luna stablecoin ($LUNC, $LUNA), has filed for Chapter 11 bankruptcy in Delaware, United States with assets and liabilities ranging from $100 to $500 million.

Terraform Labs and its LUNA token experienced a dramatic meltdown in May 2022, plunging from sky-high valuations to near oblivion. Here’s a breakdown of what happened:

In early 2022, LUNA reached an all-time high of nearly $120 per token, fueled by the algorithmic mechanism of TerraUSD (UST), a supposedly “stablecoin” pegged to the dollar. High yields offered on Anchor Protocol, a DeFi platform built on Terra, further attracted investors.

On May 7th, 2022 A large selloff of UST triggered a death spiral. Traders exploited vulnerabilities in the algorithmic mechanism, causing UST to depeg from the dollar. As UST lost its peg, LUNA’s price plummeted to maintain the balance, creating a vicious cycle. Within days, LUNA dropped to nearly zero, wiping out billions of dollars in investor wealth. UST also fell significantly, losing its stablecoin status. The Terra ecosystem and Anchor Protocol collapsed.

Terraform Labs Filed for Chapter 11 Protection

Chapter 11 bankruptcy is a form of bankruptcy protection under the United States Bankruptcy Code that is primarily designed for businesses, including corporations and partnerships. It allows a financially struggling business to reorganize its debts and operations while remaining in business. Chapter 11 is often referred to as “reorganization bankruptcy.”

Terraform Labs filed for Chapter 11 bankruptcy on January 21, 2024, in the United States Bankruptcy Court for the District of Delaware. This was just four days after the U.S. Securities and Exchange Commission (SEC) agreed to postpone their fraud trial against Terraform Labs and co-founder Do Kwon.

Chris Amani, the CEO of Terraform Labs, emphasized the significance of the company’s decision, stating that it is crucial for both the company and its investors. This strategic move enables them to pursue their objectives while concurrently addressing unresolved legal issues.

Fraud Charges

Co-founder Do Kwon is presently incarcerated in Montenegro after being convicted of document forgery. He faces charges from US regulators for allegedly defrauding investors, awaiting extradition. 

Additionally, he confronts fraud charges in South Korea, his home country, making extradition there a possibility. Simultaneously, a third legal case is in progress in Singapore, the jurisdiction where the company is registered.


While challenges are inevitable, Chapter 11 bankruptcy allows businesses to thrive even in challenging times. Filing for Chapter 11 will allow Terraform Labs to restructure its debts and potentially try to revive its operations.

If your business is struggling with debt, contact Jim Gaudiosi today and we can help you file for Chapter 11 bankruptcy the right way and preserve your business.