Terraform Labs, the company behind the $40 billion collapse of stablecoin TerraUSD and its sister token Luna, which triggered a “crypto winter” in 2022, has filed for Chapter 11 bankruptcy in the US, according to a court filing on Sunday.
In a filing with the bankruptcy court in Delaware, the Singapore-based company co-founded by cryptocurrency entrepreneur Do Kwon, listed assets and liabilities in the range of $100 million to $500 million.
Terraform Labs said it would meet all financial obligations to employees and vendors during the Chapter 11 case without requiring additional financing. It also plans to continue Web3 offerings expansion.
“The filing will allow TFL 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 (SEC),” Terraform Labs said.
In March last year, international crime agency Interpol confirmed the arrest of Mr Kwon, who had been on the run since May 2022, when TerraUSD and sister token Luna collapsed.
The cryptocurrency entrepreneur was arrested in Montenegro along with Terraform’s chief financial officer, Han Chang Joon, and his identity was confirmed through a fingerprint match, Interpol’s national central bureau in Seoul said at the time.
A federal judge has postponed the trial of the SEC against the company and its co-founder over an alleged $40 billion cryptocurrency fraud to enable Mr Kwon's extradition to the US from Montenegro.
The extradition has been delayed as Mr Kwon has appealed the court's decision.
The SEC's civil case against Terraform and Mr Kwon is linked to the collapse of TerraUSD, a “stablecoin” designed to maintain a constant $1 price, and the more traditional token Luna.
Mr Kwon and Terraform Labs were held responsible for the collapse of the two cryptocurrencies, which caused turbulence in cryptocurrency markets around the world two years ago.
Both cryptocurrencies lost about $40 billion or more when TerraUSD failed to maintain its $1 peg.
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Key changes
Commission caps
For life insurance products with a savings component, Peter Hodgins of Clyde & Co said different caps apply to the saving and protection elements:
• For the saving component, a cap of 4.5 per cent of the annualised premium per year (which may not exceed 90 per cent of the annualised premium over the policy term).
• On the protection component, there is a cap of 10 per cent of the annualised premium per year (which may not exceed 160 per cent of the annualised premium over the policy term).
• Indemnity commission, the amount of commission that can be advanced to a product salesperson, can be 50 per cent of the annualised premium for the first year or 50 per cent of the total commissions on the policy calculated.
• The remaining commission after deduction of the indemnity commission is paid equally over the premium payment term.
• For pure protection products, which only offer a life insurance component, the maximum commission will be 10 per cent of the annualised premium multiplied by the length of the policy in years.
Disclosure
Customers must now be provided with a full illustration of the product they are buying to ensure they understand the potential returns on savings products as well as the effects of any charges. There is also a “free-look” period of 30 days, where insurers must provide a full refund if the buyer wishes to cancel the policy.
“The illustration should provide for at least two scenarios to illustrate the performance of the product,” said Mr Hodgins. “All illustrations are required to be signed by the customer.”
Another illustration must outline surrender charges to ensure they understand the costs of exiting a fixed-term product early.
Illustrations must also be kept updatedand insurers must provide information on the top five investment funds available annually, including at least five years' performance data.
“This may be segregated based on the risk appetite of the customer (in which case, the top five funds for each segment must be provided),” said Mr Hodgins.
Product providers must also disclose the ratio of protection benefit to savings benefits. If a protection benefit ratio is less than 10 per cent "the product must carry a warning stating that it has limited or no protection benefit" Mr Hodgins added.
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Number of employees: 140
Sector: B2B Vertical SaaS(software as a service)
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Funding stage: Seed round
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