Terraform Labs has secured approval from a U.S. bankruptcy court to initiate its liquidation process. This significant decision was rendered by U.S. Bankruptcy Judge Brendan Shannon during a session held in Wilmington, Delaware. Judge Shannon characterized the bankruptcy plan as a 'welcome alternative' to the ongoing legal battles concerning investor losses that have plagued the company.
Through the liquidation process, Terraform Labs anticipates that it will be capable of compensating cryptocurrency investors and other stakeholders in the range of $184.5 million to $442.2 million. Earlier in June of this year, Terraform Labs reached a critical settlement with the U.S. Securities and Exchange Commission (SEC), agreeing to a remarkable $4.47 billion fine.
The SEC previously accused Terraform and its founder, Do Kwon, of misleading cryptocurrency investors, leading to a collective loss of approximately $40 billion during the catastrophic collapse of TerraUSD and Luna tokens back in 2022. Furthermore, Do Kwon currently faces criminal charges in both the United States and South Korea, although he staunchly denies any allegations of wrongdoing.
The unfolding events surrounding Terraform Labs reflect broader issues in the cryptocurrency space, highlighting the regulatory scrutiny and the need for clearer frameworks to protect investors in this volatile market..