Terraform seeks lifeline in bankruptcy to fund fraud appeal

Cryptocurrency firm Terraform Labs filed for bankruptcy on Tuesday, angling for financial breathing room to mount a longshot appeal in its legal fight with the Securities and Exchange Commission.

In the Chapter 11 petition, Terraform said bankruptcy protection would provide vital resources to dispute a December verdict finding the company and founder Do Kwon broke the law by not registering the failed TerraUSD stablecoin and Luna token.

“The exact size of a money judgment remains unknown, but it could very well outstrip the debtor’s assets,” wrote Chris Amani, Terraform’s head of operations, in the filing.

Terraform has access to roughly $28 million in Bitcoin, $7 million in assorted cryptocurrencies and $87 million in its proprietary Luna token, court documents show. But appealing typically requires posting 110% bond, which bankruptcy could help the cash-strapped company sidestep.

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“Without the protection of Chapter 11, the Debtor would likely have to liquidate after the trial,” Amani added.

An SEC spokesperson declined to comment on the latest twist in the ongoing legal saga stemming from last year’s spectacular $40 billion crypto meltdown.

Even as Terraform fights for its survival in court, the company claims it will keep developing software products and encouraging open-source growth on the newer Terra blockchain it launched from Luna’s ashes.

But the path ahead remains murky at best for the firm at the center of 2022’s “crypto winter.”