Terraform Labs secures court approval to wind down in bankruptcy
Terraform Labs has received court approval to wind down its operations as part of its Chapter 11 bankruptcy process, following a settlement with the U.S. Securities and Exchange Commission (SEC).
The company’s downfall began in May 2022, when its Terra ecosystem collapsed, causing significant financial losses for cryptocurrency investors.
The court’s decision came after Terraform Labs agreed to settle claims with the SEC, marking the end of a long legal battle.
During a hearing in Delaware, U.S. Bankruptcy Judge Brendan Shannon approved the company’s plan, stating that winding down the operations is preferable to further litigation.
Terraform Labs had filed for bankruptcy in January 2024, a move that followed accusations of defrauding investors who collectively lost approximately $40 billion.
The SEC alleged that Terraform Labs and its founder, Kwon Do-Hyung (also known as Do Kwon), misled investors about the stability of Terrausd (CRYPTO:UST) and exaggerated claims about its blockchain’s integration into a South Korean payment platform.
The court-approved plan is a significant step forward for the company, allowing it to resolve crypto-related claims as part of the bankruptcy process.
Eligible losses related to the Terra collapse could range from $184.5 million to $442.2 million, though the exact total is yet to be determined.
Kwon and Terraform Labs were found liable for fraud by a jury, and the settlement with the SEC includes a $4.47 billion payout.
Kwon continues to deny any wrongdoing, though he faces criminal charges in both South Korea and the United States.
Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.
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