Home News Terraform Labs Seeks Chapter 11 Protection Amid Legal Battle with SEC

Terraform Labs Seeks Chapter 11 Protection Amid Legal Battle with SEC

by dave
2 minutes read

Terraform Labs is making strategic moves in the legal arena, having recently filed for Chapter 11 bankruptcy protection. This move is a key part of the company’s strategy to appeal against the U.S. Securities and Exchange Commission’s (SEC) securities fraud lawsuit. CEO Chris Amani emphasized in a recent filing that this step is crucial for the company’s ongoing operations, preserving value for creditors and stakeholders, including the Terra LUNA community.

Filed on January 21 in the U.S. Bankruptcy Court for the District of Delaware, the bankruptcy protection aims to provide an orderly process for resolving claims against the company and pursuing an appeal. Amani highlighted the necessity of this protection, stating that without it, Terraform Labs would likely have to liquidate post-trial.

The background of this legal challenge stems from the SEC’s charges against the firm and its former CEO Kwon Do-hyeong in February 2023. The SEC accused them of orchestrating a significant crypto asset securities fraud while raising billions in unregistered transactions. However, Terraform Labs disputes these claims, arguing that the cryptocurrency tokens in question are not securities and thus outside the SEC’s jurisdiction.

The upcoming trial against Terraform Labs, now pushed back to late March at Kwon’s request, is set against the backdrop of the company’s turbulent history. Terraform Labs, known for the algorithmic stablecoin TerraUSD and its sister cryptocurrency Luna, witnessed a dramatic collapse in May 2022. Kwon’s subsequent arrest in March last year added to the company’s woes. Terraform’s legal strategy now focuses on challenging the SEC’s claims and seeking a positive outcome in the ongoing legal dispute.

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