Terraform Labs, after resolving a lawsuit with the SEC, has been granted court approval to conclude its operations in bankruptcy, according to a Reuters report dated September 19th.
Judge Brendan Shannon of the US Bankruptcy Court in Wilmington, Delaware, has endorsed Terraform’s bankruptcy plan, deeming it a more favorable resolution compared to protracted legal disputes concerning investor losses. This decision represents the final step in Terraform’s bankruptcy proceedings initiated in January.
In response to a jury finding Terraform liable for investor fraud in April, the company opted to settle the SEC case by agreeing to a $4.47 billion fine. Investigations revealed that investors suffered losses of up to $40 billion during the collapse of the Terra ecosystem in 2022.
Co-founder Do Kwon of Terraform has been deemed personally accountable for contributing $110 million to the settlement, along with an additional $14.3 million in prejudgment interest. Moreover, Kwon is required to transfer various assets, including ownership stakes in PYTH tokens, to the Terraform bankruptcy estate. These assets will be utilized to cover financial penalties and distributed to impacted investors via a liquidating trust.
It is important to note that the settlement proceeds will only be remitted to the regulator once all claimed losses have been settled during Terraform’s liquidation process, potentially resulting in the SEC not receiving the full sum.
Terraform anticipates disbursing between $184.5 million to $442.2 million to cryptocurrency buyers and other relevant parties through its bankruptcy liquidation. The company has acknowledged the difficulty in accurately estimating the total value of eligible crypto losses.
Since early September, Terraform has been organizing its wind-down activities, which include transferring close to $63 million in Bitcoin (BTC) to a new address.
The approval from the court to conclude Terraform’s bankruptcy represents a significant milestone in the company’s journey and the resolution of its legal responsibilities. The implications of this development on the cryptocurrency market and investors remain uncertain as Terraform progresses through this challenging phase.
