Terraform Labs, the company behind TerraUSD (UST) and Luna, has received court approval to exit bankruptcy after reaching a settlement with the U.S. Securities and Exchange Commission (SEC).

- The winding-up plan was approved by U.S. Bankruptcy Judge Brendan Shannon, who called it a “welcome alternative” to further litigation over investor losses, Reuters reports.

- The development comes three months after Terraform and co-founder Do Kwon reached a $4.47 billion settlement with the SEC to resolve fraud charges related to the collapse of the Terra ecosystem 🌐.

- The SEC accused Terraform and its co-founder of misleading investors about the stability of TerraUSD, an algorithmic stablecoin that collapsed in May 2022 after failing to maintain a $1 price.

- After losing value against the US dollar, TerraUSD’s sister token Luna collapsed, wiping out $40 billion in market value, causing heavy losses for investors and leading to a wave of bankruptcies for many companies in the industry.

- Under the settlement with the SEC, Terraform agreed to pay $3.58 billion and $469 million in pre-judgment interest, while Kwon agreed to pay $110 million and $14.32 million in pre-judgment interest along with the company.

- However, this amount will only be paid after Terraform has settled with its injured investors and other unsecured creditors. Therefore, the SEC may receive little or nothing.

- Terraform estimates that it could pay between $184.5 million and $442.2 million to crypto buyers and other stakeholders during its bankruptcy liquidation.

🌟 This news marks the final step in Terraform Labs' bankruptcy process, opening a new chapter for the company and its investors.