Terraform Labs Wins Court Approval to Wind Down Operations After SEC Settlement
Terraform Labs has gained court approval to wind down its operations in bankruptcy after reaching a settlement with the U.S. Securities and Exchange Commission (SEC), as reported on September 19.
U.S. Bankruptcy Judge Brendan Shannon endorsed the company’s bankruptcy plan in Wilmington, Delaware, describing it as a favorable alternative to prolonged litigation concerning investor losses. This approval marks the conclusion of Terraform’s bankruptcy process, which began in January.
After a jury found the company liable for investor fraud in April, Terraform agreed to a settlement with the SEC, which includes a hefty fine of $4.47 billion. Investigations revealed that Terraform misled investors to the tune of $40 billion when its Terra ecosystem collapsed in 2022.
Co-founder Do Kwon is also required to contribute $110 million towards the settlement and pay an additional $14.3 million in prejudgment interest. Furthermore, he must transfer various assets, including ownership stakes in PYTH tokens and other holdings, to the Terraform bankruptcy estate. These assets will be used to fulfill the financial penalties and will be allocated to affected investors via a liquidating trust.
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Importantly, Terraform will only pay the settlement amount to the SEC after addressing all claimed losses during the liquidation. Consequently, there’s a possibility that the SEC may not receive the full amount.
The company estimates that it could distribute between $184.5 million and $442.2 million to cryptocurrency purchasers and other stakeholders during the bankruptcy process, though it claims the total value of eligible crypto losses is difficult to determine. Terraform has also been preparing for its wind-down since early September, during which it moved nearly $63 million worth of Bitcoin to a new address.
Alexander Stefanov
Reporter at CoinsPress
Alex is an experienced finance journalist and a cryptocurrency and blockchain enthusiast. With over five years of experience covering the industry, he deeply understands the complex and constantly evolving world of digital assets. His insightful and thought-provoking articles provide readers with a clear picture of the latest developments and trends in the market. His passionate approach allows him to break down complex ideas into accessible and insightful content. Follow up on his content to be up to date with the most important trends and topics - stay ahead of the curve with CoinsPress.
