TechFlow News — Terraform Labs has received approval from a Delaware court to wind down its operations through bankruptcy proceedings.
Previously, the company agreed to settle litigation with the U.S. Securities and Exchange Commission (SEC). The SEC accused Terraform Labs of defrauding cryptocurrency investors during the 2022 collapse of TerraUSD and Luna tokens, which resulted in approximately $40 billion in losses. Bankruptcy Judge Brendan Shannon described the settlement as a "welcome alternative" to further litigation. Terraform Labs filed for bankruptcy in January and later agreed to a $4.47 billion settlement with the SEC after a Manhattan jury found the company guilty of defrauding investors in April. However, the SEC may struggle to collect the payment, as the bankruptcy agreement stipulates that funds will only be disbursed after satisfying claims related to cryptocurrency losses. The company estimates it can distribute between $184.5 million and $442.2 million to token purchasers and other stakeholders during liquidation.
The SEC alleges that Terraform and its founder, Do Kwon, misled investors about the stability of TerraUSD and falsely claimed its blockchain was used by a popular mobile payment app in South Korea. Do Kwon currently faces criminal charges in both the United States and South Korea, though he denies any wrongdoing.
