Hold onto your hats, crypto fans! Terraform Labs, the brains behind TerraUSD (UST) and Luna, has just hit the final milestone in their Chapter 11 bankruptcy saga. Yup, they’ve got the green light from the court to officially wind down operations after hashing things out with the SEC.
The nod of approval comes from US Bankruptcy Judge Brendan Shannon, who sees this as a “welcome alternative” to dragging out litigation over investor losses. So, what's the backstory? Well, about three months ago, Terraform and its co-founder Do Kwon struck a $4.47 billion deal with the SEC to settle fraud charges tied to the dramatic collapse of the Terra ecosystem.
The SEC had accused Terraform and Kwon of pulling the wool over investors' eyes about TerraUSD's stability. Spoiler alert: the algorithmic stablecoin couldn't keep its $1 peg and crashed spectacularly in May 2022. When TerraUSD lost its footing, its sister token Luna also went down in flames, wiping out a jaw-dropping $40 billion in market value. Investors were left reeling, and several firms in the industry were pushed into bankruptcy.
As part of the settlement, Terraform agreed to shell out $3.58 billion in disgorgement and $469 million in prejudgment interest. Kwon himself agreed to cough up $110 million in disgorgement and $14.32 million in prejudgment interest, sharing the burden with the company.
But here's the kicker: these hefty payments will only be made after Terraform settles with harmed investors and other unsecured creditors as part of the bankruptcy wind-down. So, the SEC might end up with a much lighter wallet than expected.
Right now, Terraform says it’s tough to nail down the exact value of crypto losses they'll be covering in the liquidation process. However, they estimate they might pay anywhere between $184.5 million and $442.2 million to crypto buyers and other folks with a stake in the game.
Back in January, when Terraform filed for bankruptcy, they estimated their assets and liabilities to be in the range of $100 million to $500 million, with creditors numbering between 100 and 199.
So there you have it, folks! Terraform Labs is wrapping things up and moving on. Stay tuned for the next exciting chapter in the ever-evolving world of crypto!
