Terraform Labs Secures Court Approval for Bankruptcy End Amid TerraUSD Collapse Settlement

COINOTAG news, September 20, reported that Terraform Labs has been granted court approval to conclude its bankruptcy proceedings following a settlement with the U.S. Securities and Exchange Commission (SEC). The SEC’s lawsuit claimed that Terraform defrauded cryptocurrency investors, resulting in losses amounting to approximately $40 billion when TerraUSD and Luna tokens collapsed in 2022. As part of the bankruptcy process, Terraform plans to compensate stakeholders with payments estimated between $184.5 million and $442.2 million.

In February 2023, the SEC filed charges against Terraform and its co-founder Do Kwon specifically related to the unstable algorithmic stablecoin Terra USD (UST). The regulatory body alleged that the company engaged in deceptive practices that misled investors. During the settlement negotiations, the two parties disputed the fine amount, with Terraform and Kwon’s legal team suggesting a $1 million penalty, while the SEC initially demanded $5.3 billion. The settlement concludes lengthy litigation and paves the way for Terraform to resolve its bankruptcy issues.