Terraform Labs has received court approval to shut down its operations after reaching a settlement with the U.S. Securities and Exchange Commission (SEC). This decision follows the company’s involvement in a lawsuit that accused it of defrauding investors who lost an estimated $40 billion when its TerraUSD and Luna tokens collapsed in 2022, according to Reuters.
In a hearing in the United States Bankruptcy Court in Wilmington, Delaware, Judge Brendan Shannon endorsed Terraform’s bankruptcy plan, stating that it was a welcome shift from the controversies of continued litigation over the investors’ losses. This, in another way, is yet another breakthrough for the company that had been in the middle of serious controversies after the failure of its algorithmic stablecoin project Terra.
Terraform, in its ongoing bankruptcy case, said it will pay its stakeholders a total of $184.5 million to $442.2 million. The firm’s decision to wind down comes just a few months after it recently resolved another case with the SEC. In February 2023, the Securities and Exchange Commission [SEC] accused Terraform Labs and its CEO Do Kwon of lying to and misappropriating investors concerning the Terra USD (UST) stablecoin that collapsed a year prior.
Terraform Ordered to Pay $4.7 Billion in SEC Settlement
In June of this year, Terraform was ordered to pay the regulators a penalty of $4.7 billion in the U.S. District Court for the Southern District of New York. This was followed by $3.58 billion in disgorgement and a civil penalty of $420 million. Moreover, Kwon himself was prohibited from engaging in any officer or director capacity in any domestic public company.
The bankruptcy act said that the SEC would be paid its claims after other creditors during the bankruptcy process. The documents for the settlement indicate that the SEC’s monetary remedies will be met if and only if Terraform assets have been liquidated under the approved bankruptcy plan to ensure that any injured shareholders and other unsecured creditors are paid in full first.
This resolution signals a significant step forward in the aftermath of one of the largest collapses in cryptocurrency history, as Terraform Labs begins to close its doors for good.
