NEW YORK – Terraform Labs received court approval on Sept 19 to wind down its operations in bankruptcy after agreeing to settle a US Securities and Exchange Commission (SEC) lawsuit.
The lawsuit accused the Singapore-incorporated company of defrauding cryptocurrency investors, including Singaporeans, who lost an estimated US$40 billion (S$51.7 billion) when its TerraUSD and Luna tokens collapsed in 2022.
US bankruptcy judge Brendan Shannon approved Terraform’s bankruptcy plan at a hearing in Wilmington, Delaware, calling it a “welcome alternative” to further litigation over the investor losses.
Terraform, which filed for bankruptcy in January, agreed to a US$4.47 billion SEC settlement after a jury in Manhattan found the company liable in April for defrauding investors.
The SEC will collect little, if anything, on that settlement amount because it agreed to be paid only after Terraform satisfies crypto loss claims as part of its bankruptcy wind-down. The company said it is currently “impossible to estimate” the total value of crypto losses that will be eligible to be paid during the liquidation.
Terraform estimated that it will be able to pay between US$184.5 million and US$442.2 million to crypto purchasers and other stakeholders as part of its bankruptcy liquidation.
The SEC had accused Terraform and founder Do Kwon of deceiving investors about the stability of TerraUSD, a stablecoin he designed to maintain a constant US$1 price, and falsely claiming that Terraform’s blockchain was used in a popular South Korean mobile payment app.
A jury found Kwon and Terraform Labs liable on civil fraud charges at trial, and Kwon and Terraform decided to settle with the SEC before a second phase of the trial that would have determined the amount of damages.
Kwon faces related criminal charges both in the United States and his native South Korea. He has denied