Singapore-based Terraform Labs , the company behind the TerraUSD stablecoin, has filed for bankruptcy protection in the United States. The company disclosed assets and liabilities within the USD 100 to USD 500 million range in its filing with the Delaware bankruptcy court.

Terraform Labs has committed to meeting all financial obligations to employees and vendors throughout the Chapter 11 proceedings without seeking additional financing. The company also outlined its intention to carry on with the expansion of its Web3 offerings. Terraform Labs representatives cited by Reuters clarified that the Chapter 11 filing is aimed at facilitating the execution of its business plan in the context of ongoing legal challenges, including representative litigation in Singapore and US litigation involving the Securities and Exchange Commission (SEC).

The SEC's civil case against Terraform Labs and its co-founder, Do Kwon, is connected to the collapse of the TerraUSD stablecoin and the Luna token, closely associated with TerraUSD. A recent development in the legal proceedings saw a federal judge postpone the SEC's trial against the company and Do Kwon over an alleged USD 40 billion cryptocurrency fraud. This postponement was made to facilitate Kwon's extradition for his involvement.

Terraform Labs and Kwon have been held accountable for the collapse of two cryptocurrencies, resulting in significant market turbulence globally two years ago. The estimated loss exceeded USD 40 billion when TerraUSD failed to sustain its USD 1 peg in May 2022. The consequences of Terraform’s collapse in Singapore In April 2023, Singapore authorities revealed their plans to investigate service providers from the digital asset sector looking to open a bank account.

Specifically, Bloomberg reported that banks in Singapore were working with local authorities to create a set of uniform standards to screen potential customers from the crypto and digital assets sectors. The move came in the context of volatility and specific industry collapses such as FTX and Terraform Labs. Moreover, local authorities also took note of the collapses of US lenders Silvergate and Signature Bank that forced clients to look for new banks.

Representatives from the Monetary Authority of Singapore (MAS) cited by Bloomberg highlighted that there are no rules preventing banks operating in the country from doing business with firms handling cryptocurrencies or other forms of digital assets. However, they emphasised that banks are required to employ customer due diligence measures to properly assess any potential risks. .