The cryptocurrency company behind the crashed TerraUSD and Luna tokens has filed for bankruptcy in the US.

Terraform Labs’ tokens collapsed in May, losing $40bn of their value and contributing to the so-called “cryptocrash” of 2022.

Co-founder Do Kwon is currently in jail in Montenegro after having been found guilty of forging documents.

He has been charged with defrauding investors by US regulators and is awaiting extradition.

He also faces fraud charges in South Korea, his native country, so could be extradited there.

A third legal case is ongoing in Singapore, where the company is registered.

Terraform Labs’ Luna token came to prominence in December 2021, when its value began to rise from $5 to a high of $116 in April 2022.

Fans of Luna became known as “Lunatics”, with Mr Kwon referred to as their “king”.

Then suddenly, on 9 May 2022, it collapsed, losing 99% of its value in just 48 hours.

It was algorithmically linked to its sister coin, TerraUSD, which was a stablecoin, meaning it was meant to stay at at a value of $1.

But the value of TerraUSD plummeted to about $0.02 – which then caused the Luna coin to nosedive.

The crash led to shockwaves around the crypto market, with investors pulling billions of dollars from other cryptocurrencies in fear of a similar crash.

It is estimated that about $400bn was wiped from the value of other cryptocurrencies such as Bitcoin.

Announcing the bankruptcy filing, Terraform Labs chief executive Chris Amani said: “This action is necessary to allow us to continue working toward our collective goals while resolving the legal challenges that remain outstanding.”

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 said in a statement.

A Chapter 11 bankruptcy means that Terraform Labs can continue to do business.

The firm offers blockchain and other Web3-related services.

The bankruptcy documents, filed in Baltimore, list Terraform as having between $100m and $500m in assets.

They also say Do Kwon owns 92% of the shares of the company, with his co-founder Daniel Hyunsung Shin owning the other 8%.

Mr Kwon was arrested in Montenegro in March 2023 as he tried to board a plane to Dubai.

Three months later, he was found guilty of forging documents – which he denied – and sentenced to jail.

The former finance officer of Terraform Labs, Han Chang-joon, was also sentenced to prison after being found guilty of the same charges.

According to Reuters, police had found doctored Costa Rican passports and a separate set of Belgian passports among their luggage.

In November 2023 a court in Montenegro approved his extradition, but was yet to decide whether it would be to South Korea or the US.