Terraform Labs gets court approval to wind down operations after settling with SEC

U.S. bankruptcy judge Brendan Shannon has approved Terraform's bankruptcy plan in Wilmington, Delaware, giving the green light to liquidation.

Terraform Labs has received court approval to wind down its operations in bankruptcy after settling a lawsuit by the U.S. Securities and Exchange Commission (SEC), Reuters reported on Sept. 19.

U.S. bankruptcy judge Brendan Shannon has approved Terraform's bankruptcy plan in Wilmington, Delaware, calling it a "welcome alternative" to further litigation over investor losses. The court's approval represents the final step in Terraform's bankruptcy proceedings, which began in January.

In April, following the jury's ruling, Terraform agreed to settle the case with the SEC by paying a $4.47 billion fine. Investigations estimate that the company defrauded investors of $40 billion when the Terra ecosystem collapsed in 2022.

Terraform co-founder Do Kwon was also found liable for paying $110 million of the agreed settlement amount, along with $14.3 million in prejudgment interest.

He must also transfer various assets, including ownership interests in PYTH tokens and other holdings, to Terraform's estate.

Notably, the settlement amount will be paid to the regulator only after Terraform covers all claimed losses during its liquidation process. Therefore, the SEC could end up not collecting the money.

The company said it could pay between $184.5 million and $442.2 million to cryptocurrency buyers and other stakeholders in its bankruptcy liquidation. According to Terraform, the total value of eligible cryptocurrency losses remains "impossible to estimate."

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