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 Editor-in-Chief of Coinspress and co-founder of Millennial Media Group, with nearly a decade of experience covering financial markets - crypto first, then everything else. It started in 2016 with Bitcoin. Like most people at the time, he didn't fully understand it - so he kept digging. Blockchain, tokenomics, the projects, the cycles. That curiosity never stopped, and eventually pulled him into traditional markets too: equities, commodities, macro. Not because he left crypto behind, but because you can't properly understand one without the other. What drives him is straightforward: he wants to know why something is happening, not just that it's happening. Most market coverage stops at the headline - price up, price down, here's a chart. Alex finds that kind of reporting actively unhelpful. If you walk away from an article without understanding the mechanism behind the move, what did you actually learn? He holds a degree in Tourism from New Bulgarian University - not the most obvious path into financial markets, but markets have a way of pulling in people who are simply too curious to stay out. He has authored over 200 in-depth analyses and more than 10,000 articles across crypto and traditional finance. He still thinks every day in markets teaches him something new. That's probably why he hasn't stopped.
