In a significant announcement on Wednesday, Terraform Labs revealed their plan to settle the SEC lawsuit by paying nearly $4.5 billion. This has sparked skepticism within the crypto community, as the bankrupt company only has $75 million in assets under management.
Source of the $4.5 Billion Settlement?
Ki Young Ju, the founder of CryptoQuant, recently raised concerns about how Terraform Labs will secure such a large sum, equivalent to 64,824 Bitcoin. He questioned whether the money was truly used to restore the UST peg, expressing doubts about the transaction's legitimacy.
“Where does this money come from? Did they use it to restore the peg? Sus,” Ki Young Ju stated on the X platform. He further emphasized the implausibility of Terraform Labs having $4.47 billion in assets, even if its market cap is $40 billion, suggesting that neither Do Kwon nor Terraform Labs should have access to such substantial funds. CoinGape also reported Coinbase CLO Paul Grewal's skepticism about the SEC settlement.
Terraform Labs' Asset Shortfall
With only $75 million in their “known” wallet, Terraform Labs faces significant challenges in raising the additional $3.75 billion needed for the settlement.
David Hoffman, co-founder of Bankless and Ethereum contributor, commented, “If Terraform Labs has $4.5B in assets… and if it is paid as a fine to the U.S. SEC, instead of the users who lost it…. it’ll be one of the craziest examples of agency corruption in our lifetimes.”
Details of the SEC Settlement
The settlement involves disgorgement to the bankrupt estate rather than a direct payment to the SEC. The judgment includes $4.05 billion in disgorgement, interest, and a $420 million civil fine. Given Terra’s bankruptcy filing in January, they will unlikely pay much of the total settlement amount, which will be treated as an unsecured claim in the Chapter 11 liquidation process.
Terra founder Do Kwon has also agreed to a ban on crypto transactions and will transfer $204 million to Terraform’s bankruptcy estate.
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