Terraform Labs, led by Do Kwon, received court approval to wind down operations as part of a bankruptcy settlement.
Terraform Labs, owned by Do Kwon, has been granted court consent to cease operations as part of a bankruptcy agreement.
Terraform’s bankruptcy plan was authorized by US Bankruptcy Judge Brendan Shannon on September 19, describing it as a “welcome alternative” to additional litigation.
The corporation, which was incorporated in Singapore, was the subject of a lawsuit for defrauding cryptocurrency investors who lost $40 billion when Luna crashed in 2022.
In January, Terraform Labs declared bankruptcy and ultimately reached a settlement agreement with the U.S. Securities and Exchange Commission (SEC) for an astonishing $4.5 billion.
The agency was seeking $4.7 billion in disgorgement and prejudgment interest for Terraform Labs and Do Kwon, as well as additional civil penalties of $420 million and $100 million for the firm and its co-founder, respectively.
D. Kwon had contended that the SEC’s initial request for $5.3 billion was “far less appropriate” than a maximum penalty of $1 million.”
The SEC is unlikely to receive a significant amount, if any, from the settlement, as it has consented to be compensated only after Terraform has addressed crypto loss claims during its bankruptcy wind-down. Terraform stated that it is “impossible to estimate” the total value of crypto losses eligible for payment during the liquidation.
The company stated that it could distribute between $184.5 million and $442.2 million to crypto purchasers and other stakeholders as part of its bankruptcy liquidation.
Luna and UST Collapse
In May 2022, the Terra ecosystem, which was led by Terraform Labs, underwent a remarkable collapse. The value of UST, an algorithmic stablecoin that was intended to maintain a 1:1 parity with the US dollar, plummeted as a result of the loss of its peg.
This resulted in a domino effect, which caused the price of Luna, the utility token of the ecosystem, to plummet to the point of near-worthlessness. The crash caused billions of dollars in losses for investors and marked the beginning of a protracted crypto winter for the remainder of the industry.
