Wanted crypto boss Do Kwon’s Terraform files for US bankruptcy

South Korean entrepreneur Do Kwon’s Terraform Labs, whose cryptocurrencies crashed dramatically in 2022, is seeking bankruptcy protection in the United States, according to court documents filed Sunday.

The collapse of the Singaporebased firm’s TerraUSD and Luna wiped out around US$40 billion in investments and caused wider losses in the global crypto market estimated at more than US$400 billion. Kwon, who co-founded Terraform in 2018, was arrested last year in Montenegro and is awaiting extradition to the United States or South Korea.

He faces fraud charges in both countries related to the crash.

The bankruptcy filing will allow Terraform “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 firm said in a statement.

Terraform “intends to meet all financial obligations to employees and vendors during the Chapter 11 case and does not require additional financing to do so”.

The company’s court filing in the US state of Delaware listed both its assets and liabilities in the US$100 million to US$500 million range. Kwon holds 92 percent of Terraform’s shares, according to the filing.

The US SEC last year charged both Kwon and Terraform with “orchestrating a multi-billion dollar crypto asset securities fraud”.

The company’s TerraUSD was marketed as a ‘stablecoin’, a token that is pegged to stable assets such as the US dollar to prevent drastic fluctuations.

But despite billions in investments and global hype, TerraUSD and sister token Luna went into a death spiral in May 2022. Experts said Kwon had set up a glorified Ponzi scheme, in which many investors lost their life savings.

He left South Korea before the crash and spent months on the run, finally winding up in custody in Montenegro after trying to board a flight with fake Costa Rican travel documents. — AFP