As a researcher who has closely followed the turbulent journey of Terraform Labs Pte. Ltd, I find myself both saddened and intrigued by this latest development. The approval of the Chapter 11 bankruptcy reorganization hearing feels like a bittersweet victory for all parties involved – a chance to clear up legal disputes while potentially offering some semblance of restitution to the affected investors.
On Thursday, the Chapter 11 bankruptcy reorganization hearing for bankrupt crypto firm Terraform Labs Pte. Ltd took place, and Judge Brendan Shannon gave the green light for the company to proceed with its bankruptcy liquidation process in Wilmington, Delaware. The judge found the proposed bankruptcy plan acceptable during the hearing. She described it as a “favorable option” that permits ongoing legal disputes concerning investor losses in Terraform Labs.
After Terraform Labs reached a settlement with the U.S. Securities and Exchange Commission (SEC), following allegations of defrauding investors, it’s important to note that the collapse of TerraUSD and LUNA tokens occurred approximately two years ago, resulting in losses for affected investors estimated at around $40 billion. Here are some key details about LUNA:
Terraform’s Chapter 11 Bankruptcy Journey
At the start of this year, Terraform Labs, a cryptocurrency company, applied for bankruptcy protection under Chapter 11 in the U.S. Their intention was to use this filing as a means to buy time, allowing them to pursue an appeal, carry on their software development work, and maintain the worth of LUNA for its shareholders.
In simpler terms, Chris Amani, CEO of Terraform Labs, explained that their filing for Chapter 11 bankruptcy was a strategic step aimed at boosting their ability to challenge a fraud lawsuit brought by the U.S. Securities and Exchange Commission (SEC). At that point, Terraform reported that its potential assets and debts had grown from $100 million to $500 million. Additionally, they anticipated having between 100 and 199 creditors.
In June, Terraform Labs was mandated by the SEC to pay approximately $4.5 billion in penalties and settlements. This total comprised around $3.6 billion in restitution, $420 million in civil fines, and about $467 million in pre-judgment interest. In addition, Do Kwon, the disheartened founder of the cryptocurrency company, consented to pay $110 million in restitution, $80 million in civil penalties, and roughly $14.3 million in pre-judgment interest.
Do Kwon has been caught up in extradition battle in Montenegro for months now.
Terraform Labs Focuses on Repaying Crypto Loss Claims
It’s unlikely that the SEC will receive any funds from these settlements, as per the agreement, the fines will only be paid once Terraform Labs has met all its obligations to those who suffered crypto losses due to their collapse. However, it’s important to note that the bankrupt company indicated that it’s difficult to calculate these claims accurately.
Simultaneously, it was evident that it had funds ranging from approximately $184.5 million to $442.2 million available for repaying cryptocurrency buyers and other interested parties during the bankruptcy process.
After receiving permission to shut down, the Terra blockchain will be handed over to community management, in line with Proposal 4818 – the last upgrade for the Terra blockchain. This proposal aims to make crucial changes before Terraform Labs finishes its operations. It’s important to mention that this proposal will facilitate necessary updates and maintain network stability as Terraform Labs ceases its support.
This update aims to meet technical needs and ready the blockchain for a shift towards community governance.
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2024-09-20 11:12