Terraform Labs, the creator of TerraUSD and Luna, has filed for Chapter 11 bankruptcy protection in the US.

The bankruptcy filing is due to legal challenges and a $40 billion fraud lawsuit from the SEC.

Despite the ongoing legal battle, Terraform Labs plans to continue its operations and meet its financial obligations.

The collapse of TerraUSD and Luna resulted in significant investor losses and a $2 trillion plunge in the crypto markets.

Co-founder Do Kwon, who faces fraud charges, holds a majority of the company's shares and is awaiting extradition.

The CEO hopes the bankruptcy filing will resolve legal issues and enable the company to advance its tools and infrastructure.

Crypto.com's delisting of Terra Luna Classic caused a price drop, adding to the uncertainty surrounding LUNC and LUNA prices.

The bankruptcy filing is expected to impact the stablecoin market, but Terraform Labs remains dedicated to resolving ongoing litigation and continuing infrastructure work.