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Singapore Crypto Firm Terraform Labs Approved for Bankruptcy

9 hours ago
9 hours ago


Terraform Labs Receives Court Approval for Bankruptcy Plan

Background

Terraform Labs, a Singapore-incorporated company, has received court approval to wind down its operations in bankruptcy after settling a lawsuit with the US Securities and Exchange Commission (SEC). The lawsuit alleged that Terraform defrauded cryptocurrency investors, resulting in significant losses.

Approval of Bankruptcy Plan

  • US bankruptcy judge Brendan Shannon approved Terraform’s bankruptcy plan, deeming it a favorable alternative to prolonged litigation over investor losses.
  • Terraform agreed to a $4.47 billion settlement with the SEC after being found liable for defrauding investors in April.
  • The SEC will only collect on the settlement amount after Terraform satisfies crypto loss claims during its bankruptcy wind-down process.

    Financial Implications

  • Terraform estimates it can pay between $184.5 million and $442.2 million to crypto purchasers and stakeholders during its liquidation.
  • The total value of crypto losses eligible for payment remains uncertain.

    Allegations Against Terraform

  • The SEC accused Terraform and founder Do Kwon of misleading investors about the stability of TerraUSD and falsely claiming their blockchain was utilized in a popular South Korean mobile payment app.
  • Kwon and Terraform were found liable for civil fraud charges, prompting them to settle with the SEC before a damages determination phase.
  • Kwon faces criminal charges in the US and South Korea, though he denies any wrongdoing.

    Collapse of TerraUSD and Luna

  • TerraUSD and Luna collapsed in May 2022 when TerraUSD failed to maintain its peg to the US dollar.
  • This collapse triggered a market crash, leading to a series of bankruptcies in the crypto industry.

    In conclusion, Terraform Labs’ bankruptcy approval and settlement with the SEC mark a significant development in the cryptocurrency world. The company’s actions have had far-reaching consequences, impacting investors and stakeholders alike. Understanding the implications of such cases is crucial for individuals navigating the complex landscape of digital assets and investments.

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