The Terra network and its leader, Do Kwon, once reached the top of the crypto world but collapsed within days in May 2022, wiping out the savings of many everyday investors. In February 2023, the U.S. Securities and Exchange Commission (SEC) sued Kwon and his company, Terraform Labs, for selling unregistered securities and defrauding investors during Terra’s dramatic collapse.
Recently, Kwon and Terraform settled their SEC civil fraud case, agreeing to pay $4.5 billion in penalties and disgorgement. The settlement, approved by District Court Judge Jed Rakoff of the Southern District of New York on June 13, requires Terraform Labs to cease operations immediately and seek approval for a Chapter 11 liquidation plan in its bankruptcy case.
Terraform Labs Winds Down Operations Amid Legal Defeat
Terraform Labs’s current CEO, Chris Amani, asked the community on Wednesday to take over the reins of the Terra network as the company winds down. “[Terraform Labs] always intended to dissolve at some point, and that point is now,” Amani said on X (formerly known as Twitter). “We will be winding down operations completely.”
The SEC scored a major victory against Kwon and Terraform Labs two months ago when a jury found the company and its founder had conducted securities fraud through misrepresentations regarding Terra’s success and UST/LUNA stability.
Before this legal defeat, Terraform Labs and its community were well-positioned to advance the Terra ecosystem, according to Amani. However, after the significant court loss, the CEO indicated that the company “can no longer operate.”
Terraform Labs to Sell Key Projects and Transition to Community Control
Terraform Labs CEO, Chris Amani, announced that the company will sell several key projects, including the portfolio manager Pulsar Finance, the Cosmos wallet Station, and the Enterprise Protocol, which is used for creating DAOs within the Cosmos ecosystem.
Amani noted that the Terra and Terra Classic blockchains can continue operating under the community’s control. “The community will need to take over ownership of the chain,” Amani said, suggesting a community-led governance model that could transform how crypto projects operate after such predicaments.
He also mentioned plans for a community proposal to burn all of the company’s remaining vested LUNA tokens.
Amani’s announcement comes nearly a year after he was named the firm’s director and CEO. He took over from Do Kwon in July 2023, having previously served as the firm’s chief operating officer. His predecessor, Do Kwon, was embroiled in personal legal issues at the time.
Following Terraform Labs’ decision to dissolve operations, the prices of LUNA and LUNC have dropped by 5.6% and 4.8% respectively in the last 24 hours. Despite this, Amani indicated that there are more plans in the works and promised to communicate with the community once the courts approve these plans.
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