Terraform Labs: Filing for Bankruptcy Will Allow Us to Appeal SEC Lawsuit

According to a report by Reuters, Terraform Labs revealed through its latest court filings that the decision to file for bankruptcy earlier will enable it to appeal in its lawsuit with the U.S. Securities and Exchange Commission (SEC).

The Next Steps for Terraform Labs After Bankruptcy

Terraform Labs has filed legal documents with the bankruptcy court indicating that the bankruptcy application is crucial for its upcoming fraud lawsuit trial with the SEC, claiming that the company may not be able to appeal the case and pay the yet-to-be-determined fine.

Last week, Terraform Labs sought bankruptcy protection in the bankruptcy court of Delaware, USA, estimating assets and liabilities to be between 100 million and 500 million US dollars.

In a ruling last December, a judge found that Terraform Labs and its founder Do Kwon violated US laws by failing to register two digital currencies, with fraud charges against the two defendants set to be tried in March this year.

In the document, Terraform Labs stated that applying for bankruptcy protection would allow them to appeal without the burden:

If an appeal is made in the case, a "supersedeas bond" equivalent to 110% of the total judgment amount must be paid before proceeding with the appeal; however, under Chapter 11 bankruptcy protection, the company can appeal without having to pay the bond.

Furthermore, the document also mentioned the company's remaining assets, including around 87 million US dollars in Luna tokens, around 28 million US dollars in Bitcoin, and 7 million US dollars in other cryptocurrencies.

Chris Amani: Bankruptcy Law Protects Creditors from Liquidation

Chris Amani, Chief Operating Officer of Terraform, commented:

Without the protection of Chapter 11 bankruptcy law, debtors may face liquidation after the trial.

He added, "If successful in the appeal, we will have the opportunity to rid ourselves of a significant legal claim burden on debtors, benefiting debtors, their creditors, and the broader community."

At the same time, the company revealed that it would take the same position in the appeal, arguing that the SEC has no authority to regulate the company as its cryptocurrencies are not considered securities.

Recalling the Collapse of TerraUSD and Luna

As a standout industry newcomer in 2022, Terraform was a focus during the crypto winter; however, the collapse of its algorithmic stablecoin project TerraUSD UST and Luna led many crypto companies including 3AC, Celsius, BlockFi, Voyager, and Genesis to bankruptcy.

The Past and Future of DeFi Stablecoins: Post Terra UST Crash Reflections

Currently, Terraform Labs stated that they will continue to develop practical tools and applications on their newly created Terra blockchain, such as their in-house crypto wallet Station, while encouraging other developers on the chain to join their ranks.

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