In January, Terraform Labs filed for Chapter 11 bankruptcy and settled with the SEC for $4.47 billion.
Do Kwon’s Terraform Labs, the company behind the blockchain protocol Terra, secured court approval on Thursday, to wind down its operations in bankruptcy.
As previously announced, the bankrupt crypto firm faced its Chapter 11 bankruptcy reorganisation hearing on September 19. The Thursday hearing was crucial in determining Terraform Labs’ fate following its ongoing legal battles and financial instability.
U.S. Bankruptcy Judge Brendan Shannon approved the firm’s bankruptcy plan in Wilmington, Delaware. Terraform Labs has agreed to settle the US Securities and Exchange Commission (SEC), Reuters reported.
Judge Shannon called the hearing a “welcome alternative” to further litigation over the massive loss for investors.
Terraform Labs filed for Chapter 11 bankruptcy in January and reached a $4.47 billion settlement with the SEC in June. The federal regulator originally sought $5.3 billion from the company in April.
Following bankruptcy liquidation, the company is estimated to settle with creditors and stakeholders for between $184.5 million and $442.2 million.
Terraform Labs’ current CEO, Chris Amani, shared on X in June that the company always intended to dissolve and is now closing operations completely.
Terraform Labs Says “Impossible to Estimate” Total Crypto Losses to be Paid
Meanwhile, the SEC will initially collect little on the settlement, as the regulator previously agreed to be paid only after Terraform Labs settles with its creditors.
The company noted that it is “impossible to estimate” the total value of crypto losses, which are eligible to be paid during liquidation. The numbers provided by the company are only an estimate, the release read.
The US SEC accused Terraform Labs, and CEO Do Kwon of defrauding investors by orchestrating a multi-billion dollar crypto scheme. Terraform’s TerraUSD and Luna stablecoins plummeted, wiping approximately $60 billion from investors’ holdings.
After the crash, Kwon successfully evaded authorities for months by hiding in various locations across Europe and Asia before ultimately getting caught in Montenegro last spring. Kwon has since been held in the Balkan nation as he awaits potential extradition to the US or South Korea.
Further, Montenegro’s Supreme Court will decide by this month whether the extradition process of Do Kwon involved legal violations.