According to PANews, Terraform Labs has received approval from a U.S. bankruptcy court to commence liquidation. The decision was made by U.S. Bankruptcy Judge Brendan Shannon during a hearing in Wilmington, Delaware. Judge Shannon described the bankruptcy plan as a 'welcome alternative' to ongoing litigation over investor losses. Terraform Labs estimates that it will be able to pay between $184.5 million and $442.2 million to cryptocurrency investors and other stakeholders as part of the liquidation process.

Earlier this year, in June, Terraform Labs reached a settlement with the U.S. Securities and Exchange Commission (SEC), agreeing to pay a $4.47 billion fine. The SEC had previously accused Terraform and its founder, Do Kwon, of deceiving cryptocurrency investors, who suffered approximately $40 billion in losses when TerraUSD and Luna tokens collapsed in 2022. Do Kwon faces criminal charges in both the United States and South Korea, although he denies any wrongdoing.