Terraform Labs Bankruptcy

Another chapter has closed for Terraform Labs after receiving approval from a bankruptcy court to cease its operations, according to reporting from Reuters.

Terraform, the firm behind the algorithmic stablecoin Terra, estimated that it will pay about $184.5 million to $442.2 million to stakeholders as part of this bankruptcy.

The wind down comes a few months after a high-profile case brought by the U.S. Securities and Exchange Commission (SEC).

The SEC charged Terraform and co-founder Do Kwon in February 2023 over the collapse of the algorithmic stablecoin Terra USD (UST), which fell a year earlier. The agency alleged that Terraform defrauded and misled investors. Both sides contended over the fine amounts: Terraform and Kwon’s legal team argued for fines closer to $1 million, while the SEC proposed $5.3 billion.

In June, Terraform Labs agreed to a $4.7 billion fine in the U.S. District Court for the Southern District of New York. As a part of this settlement, Terraform committed to pay $3.58 billion in disgorgement and $420 million in civil penalties, along with barring Kwon from serving as an officer or director in any public company.

The SEC stated it would pursue its claim only after creditors are compensated in the bankruptcy process. According to the liquidation terms of the Chapter 11 Plan, the SEC will recover its claim only after harmed investors and other unsecured creditors have been fully compensated. If Terraform’s assets are distributed according to the proposed plan, the SEC’s monetary remedies will be considered satisfied.