Bankruptcy Hearing Results in Courts Approval of Terraform Labs Dissolution

A judge approved Terraform Labs winding down its operations as part of the firm’s bankruptcy plan in the United States.
According to a Sept. 19 Reuters report, Judge Brendan Shannon of the US Bankruptcy Court for the District of Delaware
approved
Terraform’s bankruptcy plan. The company
filed for Chapter 11 protection
in January, claiming between $100 and $500 million in estimated liabilities and assets.
Judge Shannon reportedly called the plan a “welcome alternative” to further litigation to address investor losses. Terraform’s bankruptcy proceedings followed the US Securities and Exchange Commission (SEC) filing a lawsuit against the platform and its founder, Do Kwon, in February 2023.
The first domino to fall
One of the first major crypto platforms to fail in 2022, Terraform’s collapse was attributed to the instability of its algorithmic stablecoin, UST, and other claims the founders made about the blockchain’s use cases. Other crypto firms, including BlockFi, FTX, and Celsius, filed for bankruptcy that year.
In April 2024, a judge
found Terraform and Kwon liable
for defrauding investors. He later ordered the two parties to pay the SEC roughly $4.5 billion in fines and civil penalties.
In the Sept. 19 bankruptcy hearing, Terraform reportedly suggested it could pay between $185 million and $442 million as part of its winding down plan, but its total losses were “impossible to estimate.” It’s unclear whether many of Terraform’s investors can expect to be made whole.
Related:
Terra crash anniversary: Community reflects on the lessons learned
Both the SEC and bankruptcy cases have moved forward without Kwon’s attendance in person. He was arrested in Montenegro in 2023 for using falsified travel documents and served four months in prison.
At the time of publication, Kwon awaits extradition to either the US or South Korea to face potential criminal charges. His case has been bouncing between Montenegro’s lower and higher courts for months.
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