Crypto firm Terraform Labs files for Chapter 11 bankruptcy protection

File - Police escort Terraform Labs founder Do Kwon in Montenegro's capital Podgorica, March 24, 2023. Terraform Labs has filed for Chapter 11 bankruptcy protection, less than two years after a tremendous collapse of the company's cryptocurrency devastated traders around the world. Kwon was arrested in connection with the collapse. (AP Photo/Risto Bozovic, File)

NEW YORK (AP) — Terraform Labs has filed for Chapter 11 bankruptcy protection, less than two years after a collapse of the company’s cryptocurrency devastated investors around the world.

The Singapore crypto firm filed for protection in U.S. bankruptcy court in Delaware on Sunday, according to court documents. Terraform listed both its estimated assets and liabilities in the $100 million to $500 million range.

Terraform said that the bankruptcy filing will allow the company to “execute on its business plan while navigating ongoing legal proceedings,” which includes litigation in Singapore as well as the U.S.

Terraform added that it intends to fulfill all financial obligations to employees and vendors during this bankruptcy case, and does not require additional financing. The company also plans to continue the expansion of its Web3 offerings.

“We have overcome significant challenges before and, against long odds, the ecosystem survived and even grew in new ways post-depeg; we look forward to the successful resolution of the outstanding legal proceedings,” Chris Amani, Terraform Labs CEO, said in a prepared statement.

Terrform's legal troubles boiled over following the May 2022 implosion of digital currencies TerraUSD and Luna.

Terraform Labs founder Do Kwon was arrested in Montenegro last year and sentenced to four months in prison for using forged documents while attempting to fly to Dubai using fake Costa Rican passports.

South Korea and the United States have requested Kwon's extradition from Montenegro.

TerraUSD was designed as a “stablecoin,” a currency that is pegged to stable assets like the U.S. dollar to prevent drastic fluctuations in prices. However, an estimated $40 billion in market value was erased for the holders of TerraUSD and its floating sister currency, Luna, after it plunged far below its $1 peg.