U.S. Court Approves Bankruptcy Wind-Down for Terraform Labs
Terraform Labs, the company behind the Terra blockchain protocol founded by Do Kwon, received court approval on Thursday to proceed with its bankruptcy wind-down. This decision comes after a critical hearing regarding the firm's Chapter 11 reorganization held on September 19.
U.S. Bankruptcy Judge Brendan Shannon granted approval for the company's bankruptcy plan during the session in Wilmington, Delaware. Reports indicate that Terraform Labs has reached a settlement with the U.S. Securities and Exchange Commission (SEC).
Judge Shannon described the court's decision as a "welcome alternative" to prolonged litigation following significant losses experienced by investors. Terraform Labs filed for Chapter 11 bankruptcy in January and had previously settled with the SEC for $4.47 billion in June, down from an original demand of $5.3 billion made by the regulator in April.
The bankruptcy liquidation process is projected to allow Terraform Labs to settle with creditors and stakeholders for amounts ranging between $184.5 million and $442.2 million. However, the company has stated it is "impossible to estimate" the total value of crypto losses eligible for payment during the liquidation, and the figures provided are merely estimates.
The SEC accused Terraform Labs and CEO Do Kwon of defrauding investors through a multi-billion dollar crypto scheme, leading to the collapse of the TerraUSD and Luna stablecoins and erasing approximately $60 billion from investors’ assets.
Following the crash, Kwon managed to evade authorities for several months, relocating between various locations in Europe and Asia before being apprehended in Montenegro last spring. He is currently detained there while awaiting a decision on his extradition to either the U.S. or South Korea.
Additionally, Montenegro’s Supreme Court is expected to rule this month on whether any legal violations occurred during the extradition process involving Do Kwon.
