Legal Background and Bankruptcy Proceedings
In September 2024, a US Bankruptcy Judge approved the company’s plan to wind down operations. The judge described the plan as a better alternative than prolonged litigation. Terraform Labs filed for bankruptcy in January 2023 following the collapse of its TerraUSD stablecoin and Luna
LUNA
$0.39
in May 2022. The event led to around $40 billion in investor losses.
Its founder, Do Kwon, was accused of financial fraud. Terraform Labs reached a $4.5 billion settlement with the US Securities and Exchange Commission (SEC). However, the SEC is unlikely to collect the full amount, as the settlement will be paid after Terraform addresses crypto loss claims from its bankruptcy proceedings.