Terraform Labs has received court approval to start winding down its operations.
The approval allows the company to pay creditors by liquidating its assets.
Terraform estimates it will pay between $184.5 million and $442.2 million to affected investors, but total losses are unclear.
Terraform Labs has received the green light from a U.S. bankruptcy court to begin winding down its operations following the resolution of a prolonged legal case with the U.S. Securities and Exchange Commission (SEC), according to reports from September 19.Â
The U.S. Bankruptcy Judge Brendan Shannon approved Terraformâs bankruptcy plan, which he described as a âwelcome alternativeâ to ongoing litigation regarding investor losses.
This marks the final stage of Terraformâs bankruptcy process, which began in January. In April, a jury found Terraform liable for investor fraudâleading to a settlement with the SEC in which the company agreed to pay a large fine of $4.47 billion. This settlement follows the collapse of Terraformâs Terra ecosystem in 2022, which resulted in investor losses of about $40 billion.
Do Kwonâs Responsibility and Settlement Details
Terraformâs co-founder, Do Kwon, was personally held responsible for $110 million of the settlement amount, with an additional $14.3 million in prejudgment interest. He must also transfer various assets, including ownership stakes in certain tokens (PYTH), to help repay affected investors. These assets will be part of the liquidating trust used to compensate affected investors.
Interestingly, the settlement payment to the SEC will only be made after all claims in the liquidation process are addressed. This means that thereâs a chance the SEC may not receive the full settlement amount. The company estimates it could distribute between $184.5 million and $442.2 million to cryptocurrency buyers and other stakeholders. However, the exact extent of eligible losses remains unclear.
Finally, the company âbegan preparations for this wind-downâ in early September, transferring approximately $63 million in Bitcoin (BTC) to a new wallet address.
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