Terraform Labs, the company behind the Terra blockchain, has received court approval to end its bankruptcy operations.
Reuters reported that after reaching an agreement with the US Securities and Exchange Commission (SEC), the blockchain company has been given the green light to close its operations.
This outcome comes after a tumultuous process that began with the collapse of its blockchain ecosystem and its LUNA and UST tokens, in 2022. This unfortunate event marked the cryptocurrency industry, leaving millions of investors with exorbitant losses that exceeded $40.000 billion.
A new beginning for Terraform Labs
U.S. Bankruptcy Judge Brendan Shannon approved Terraform Labs’ bankruptcy plan at a recent hearing in Wilmington, Delaware. During the hearing, the judge called the plan a “welcome” alternative to the protracted litigation that would have arisen over investor losses. The decision represents a crucial step in the restructuring process for the company, which filed for bankruptcy in January after facing fraud allegations from the SEC.
According to Reuters, the court approval will allow Terraform Labs to move toward liquidating its assets and satisfying the claims of investors affected by the collapse.
Despite the financial difficulties, the company has stated its intention to meet its obligations as it restructures. Therefore, this court settlement not only marks the end of a difficult chapter, but also opens the door to a new beginning for the company and its operations.
A $4.470 billion settlement with the SEC
After being found liable for defrauding investors, Terraform Labs has reached a settlement with the SEC, agreeing to pay a $4.470 billion fine. This settlement came after a jury in Manhattan found the company guilty of misleading investors about the stability of its algorithmic stablecoin, TerraUSD (UST), which was designed to maintain a constant value of $1 without relying on a reserve of physical assets.
The settlement stipulates that the SEC will not collect the agreed-upon amount until Terraform satisfies claims for cryptocurrency losses during its liquidation process. This means that the securities regulator could end up not receiving full payment of the stated fine, depending on the company’s ability to meet investors’ claims.
Previous reports have said Terraform has estimated it could pay between $184,5 million and $442,2 million to affected investors, though the total value of eligible losses remains “impossible to estimate.”
LUNC Price Reaction
The news of the court approval and the agreement with the SEC has had a notable impact on the price of LUNC, the network's native cryptocurrency.
According to CoinMarketCap data, the price of LUNC experienced a surge following Judge Shannon's ruling. The cryptocurrency has risen by 6,3% in the last few hours, trading at around $0,000084. On the other hand, the cryptocurrency LUNA, the new currency which was created after the collapse of Terra and assumed the original name of the digital asset, experienced a 5,2% increase after the announcement. However, at the time of writing, LUNA shows a drop in its price of 3,7%.
Market analysts note that while the court approval is a step towards stabilizing Terraform Labs, the legal and financial challenges facing the company are not over yet. Uncertainty over the company’s ability to meet its payment obligations to investors and the SEC could continue to impact LUNC’s price in the market.
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