Terraform Labs, the company behind the $40bn collapse of terraUSD digital tokens in 2022, has filed for Chapter 11 bankruptcy protection in the state of Delaware, as its co-founder Do Kwon faces extradition to the US by mid-March to face a trial over alleged fraud.
Terraform Labs estimated both assets and liabilities were between $100mn and $500mn in a filing on Sunday to protect it from creditors and give it breathing space to reorganise.
“The filing will allow TFL to execute on its business plan while navigating ongoing legal proceedings, including representative litigation pending in Singapore and US litigation involving the Securities and Exchange Commission,” the Singapore-based company said in a statement.
Kwon owns 92 per cent of Terraform Labs, while his co-founder Daniel Shin owns the remainder, according to the court document. A US federal judge recently postponed the SEC trial to enable Kwon’s extradition for his participation. US District Judge Jed Rakoff said last month that Terraform Labs was liable for selling unregistered securities and the SEC case against the company must be tried by a jury.
Kwon, the South Korean entrepreneur held in Montenegro last year for trying to leave the country on a forged passport, has been seeking to delay the civil lawsuit filed by the SEC slated for January 29, his lawyer David Patton said last week. Kwon wants to postpone the trial until at least March 18 so he can attend it.
“Mr Kwon’s extradition process in Montenegro is in its final stages and Montenegro could order extradition at any moment,” Patton said in a filing in the Manhattan federal court. “Accordingly, we understand that Mr Kwon could be in the US as soon as the middle of March.”
Kwon became one of the crypto industry’s most infamous executives as the implosion of terraUSD and its sister token, luna, sparked a crypto market crash in May 2022, engulfing many of the industry’s leading players. The US and South Korea are seeking to extradite him on fraud charges.
The justice minister in Montenegro will determine which country has priority. If he is extradited to the US in March, it will come just a few months after the conviction of crypto exchange FTX co-founder Sam Bankman-Fried on fraud charges in New York.
The Manhattan US attorney’s office, which also prosecuted Bankman-Fried, has charged Kwon for allegedly orchestrating a cryptocurrency fraud that led to billions of dollars in losses in April 2018 and May 2022. Kwon also faces eight criminal counts including securities, commodities and wire fraud, while he is accused of violating capital market rules in South Korea.
“The US tends to give heavier punishment for financial criminals than Korea, but Kwon won’t be able to avoid arrest as soon as he enters his home country,” said Choi Hwoain, a crypto expert in Seoul.
“He seems to think he can get bail in the US and can fight for his innocence there, believing that US authorities’ view of cryptocurrency has softened recently.”
This news is republished from another source.
