Cryptocurrency company Terraform Labs Pte Ltd., which is facing fraud charges from the U.S. Securities and Exchange Commission, has filed for bankruptcy in Delaware. 

TechCrunch reported the move today, citing court documents submitted on Sunday. Terraform’s Chapter 11 paperwork specifies that the value of its assets and liabilities ranges from $100 million to $500 million. The company told the court that it will be capable of meeting financial obligations to employees and suppliers without external financing.

“The filing will allow TFL to execute on its business plan while navigating ongoing legal proceedings, including representative litigation pending in Singapore and U.S,” Terraform stated.

Earlier this month, the SEC charged the company and its co-founder Do Kwoon with defrauding investors. Earlier, Kwoon was apprehended in Montenegro after South Korea issued a warrant for his arrest over alleged violations of the latter country’s capital markets law. The litigation centers on two defunct cryptocurrencies, UST and Luna, that Terraform offered from 2018 until their collapse in 2022.

UST was marketed as a stablecoin pegged to the U.S. dollar. In May 2022, the cryptocurrency’s value fell below the dollar and ultimately crashed to zero, erasing a half-trillion dollars from the market value of the digital asset sector. The development also led to the collapse of LUNA, a second cryptocurrency developed by UST.

The SEC charges that Terraform misled investors about the stability of UST. Furthermore, the company allegedly claimed that the cryptocurrency could provide annual returns of 20% per year.

Another section of the SEC’s complaint focuses on LUNA, the other cryptocurrency developed by Terraform. According to the SEC, the company falsely claimed that the operator of a leading South Korean mobile payments app adopted the blockchain on which LUNA was based. Terraform allegedly told investors that this development would increase the value of the cryptocurrency.

The case was originally scheduled to go to trial on Jan. 29. Last week, a federal judge pushed back the date because of the possibility that Do Kwon may be extradited to the U.S. from Montenegro. The trial is now set to begin on March 25 with no further delays if Kwon is not extradited.

According to Terraform’s newly filed bankruptcy documents, the Chapter 11 proceedings will allow it to continue pursuing its business plan while the litigation is ongoing. The company recently launched a new version of its Station crypto wallet that promises to ease tasks such as moving digital assets from one blockchain to another. Previously, Terraform acquired a startup called Pulsar Finance that developed an analytics platform for monitoring cryptocurrency portfolios. 

Image: UST