In a significant development within the crypto industry, Terraform Labs has received approval for bankruptcy liquidation following a settlement with the U.S. Securities and Exchange Commission (SEC). This approval marks a pivotal moment as Terraform Labs moves toward winding down its operations in response to allegations of defrauding cryptocurrency investors. The SEC’s accusation of fraud resulted in losses totaling an estimated $40 billion when Terraform’s TerraUSD and LUAN tokens crashed in 2022.
During a hearing in Wilmington, Delaware, U.S. Bankruptcy Judge Brendan Shannon granted approval for Terraform’s bankruptcy plan, emphasizing the importance of this resolution as an alternative to prolonged legal battles over investor losses. The bankruptcy filing in January 2024 paved the way for the company to initiate the process of liquidating its assets.
As part of the settlement terms, Terraform Labs agreed to pay the SEC $4.47 billion following a ruling in April that held the company liable for defrauding investors. While the SEC’s aim is to recoup losses, the likelihood of substantial recovery remains uncertain, given the agreement to pay out after Terraform addresses claims related to crypto losses during the liquidation process.
Terraform has acknowledged the challenge of estimating the total value of eligible crypto loss claims at present. The company anticipates disbursing between $184.5 million and $442.2 million to impacted crypto buyers and other stakeholders throughout the liquidation proceedings.
It is important to note that the information provided is not intended as investment advice. Stay informed and vigilant in navigating the complexities of the crypto industry.
