Key Takeaways
- Terraform Labs’ Chapter 11 plan confirmation hearing is slated for Sept. 19.
- Terraform Labs filed for Chapter 11 bankruptcy in January earlier this year.
- The bankrupt crypto firm has already reached a $4.47 billion settlement with the US SEC.
Terraform Labs, the company behind the troubled Terra-LUNA ecosystem, has reached a key milestone in its US bankruptcy proceedings..
A Delaware court has set a hearing for September 19, 2024, to consider the company’s Chapter 11 bankruptcy plan. This marks a significant step forward after months of uncertainty.
The company filed for Chapter 11 bankruptcy protection in January 2024, citing financial difficulties.
An affiliate company, Terraform Labs Limited, also filed for bankruptcy protection in July. Investors and the cryptocurrency community will closely watch the court’s decision on the bankruptcy plan.
What’s Terraform Labs Liquidation Proposal?
According to the court documents, the United States Bankruptcy Court for the District of Delaware held a preliminary hearing on Aug. 7 and approved Terraform Labs’ plan of liquidation. A hearing to confirm the proposed plan is scheduled before U.S. bankruptcy judge Brendan L. Shannon later in September.
Under its proposed liquidation plan, Terraform Labs (TFL) is looking to sell four of its businesses: Pulsar Finance, a cross-chain portfolio tracker; Station, a non-custodial Cosmos-based hot wallet; Enterprise, a no-code DAO management platform; and Warp, an on-chain automation protocol for executing smart contracts.
The confirmation hearing on Sept. 19 will decide the liquidation plan’s final fate. If necessary, it may be modified before, during, or after the hearing as per the court orders.
SEC Settlement
Terraform Labs’ Terra ecosystem was one of the largest thriving crypto communities at its peak. The Layer 1 network, Terra Classic, boasted a total value locked (TVL) of over $31.3 billion, helping the native Luna Classic token (LUNC) to a $41 billion market cap.
The impressive growth of the Terra ecosystem was propelled by the success of its uncollateralized “algorithmic” stablecoin UST, which promised a 20% annual return for holders. However, by May 2022, UST became the key reason for the Terra ecosystem’s downfall as it depegged from its $1 value, leading to a spiral collapse of the $40 billion ecosystem.
The United States Securities and Exchange Commission filed charges against Terraform and its co-founder, Do Kwon, in February 2023. A year later, in June 2024, the SEC reached a $4.47 billion settlement with the now-bankrupt crypto firm, making it one of the largest settlements in the cryptocurrency industry’s history.
Terraform Labs was found liable for defrauding cryptocurrency investors of an estimated $40 billion after the collapse of the Terra-LUNA ecosystem.
While Terraform Labs entered a bankruptcy protection plan after settling with the SEC, its co-founder Kwon narrowly missed being extradited to the U.S. Currently, Kwon is being deported to South Korea.
Prashant Jha is a seasoned crypto journalist based in Delhi, India, with a Bachelor’s Degree in Computer Science Engineering. Passionate about the evolving world of blockchain and cryptocurrencies, he has been a dedicated voice in the industry since 2018. Prashant’s expertise lies in regulatory reporting, where he unravels complex legal and financial developments with clarity and precision. Before joining CCN in 2024, he honed his craft at Cointelegraph, establishing himself as a trusted name in crypto journalism.
His coverage spans major industry events, including the high-profile collapses of FTX, Three Arrows Capital (3AC), and LUNA, offering readers insightful analyses of their regulatory and market implications. Prashant’s technical background enables him to bridge the gap between intricate blockchain technology and its real-world applications, making his work accessible to novices and experts.
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