On Thursday, Terraform Labs, the company responsible for the blockchain protocol Terra, received court consent to cease operations in bankruptcy.
As previously announced, the Chapter 11 bankruptcy reorganization hearing for the insolvent crypto firm was conducted on September 19. The Thursday hearing determined Terraform Labs’ fate, which is essential in light of its ongoing legal disputes and financial instability.
The bankruptcy plan of the firm was authorized by U.S. Bankruptcy Judge Brendan Shannon in Wilmington, Delaware. According to Reuters, Terraform Labs has consented to a settlement with the Securities and Exchange Commission (SEC) of the United States.
Judge Shannon characterized the hearing as a “welcome alternative” to additional litigation regarding the substantial loss suffered by investors.
In January, Terraform Labs initiated Chapter 11 bankruptcy proceedings and ultimately reached a $4.47 billion settlement with the Securities and Exchange Commission in June. In April, the federal regulator requested $5.3 billion from the company.
The company is anticipated to resolve with creditors and stakeholders for a sum between $184.5 million and $442.2 million following bankruptcy liquidation.
In June, Chris Amani, the CEO of Terraform Labs, disclosed on X that the company has always intended to dissolve and is now terminating operations entirely.
Terraform Labs Says “Impossible to Estimate” Total Crypto Losses to be Paid
In the interim, the SEC will initially receive minimal compensation from the settlement, as the regulator had previously agreed to accept payment only after Terraform Labs has settled with its creditors.
The company acknowledged that the total value of crypto losses, eligible for payment during liquidation, is “impossible to estimate.” The release stated that the company’s figures are merely an estimate.
Terraform Labs and its CEO, Do Kwon, were accused by the U.S. Securities and Exchange Commission of orchestrating a multibillion-dollar cryptocurrency conspiracy to defraud investors.
Terraform’s TerraUSD and Luna stablecoins experienced a significant decline, resulting in an estimated $60 billion loss for investors.
Kwon managed to elude authorities for several months by concealing himself in a variety of locations throughout Europe and Asia following the crash. Ultimately, he was apprehended in Montenegro last spring.
Kwon has been detained in the Balkans and is awaiting potential extradition to the United States or South Korea.
Additionally, the Supreme Court of Montenegro will determine whether the extradition of Do Kwon resulted in legal violations this month.