- The company is officially closing after a $40 billion collapse.
- Terraform faced a $4.47 billion SEC settlement and criminal charges.
- The collapse caused significant financial damage to investors.
The curtain falls on Terraform Labs, the once-mighty crypto firm that is officially shutting down after its devastating $40 billion collapse. The company was behind the failed TerraUSD and Luna tokens in 2022 that rocked the crypto world.
During a hearing in Wilmington, Delaware, U.S. Bankruptcy Judge Brendan Shannon described the plan as a “welcome alternative” to minimize investor losses rather than engage in lengthy legal battles. The massive loss of funds left investors and the cryptocurrency world in shock.
The blockchain firm, founded by Do Kwon and Daniel Shin, was once known for its Terra blockchain protocol and algorithmic stablecoin payment platform. However, the company’s fortunes dropped drastically in May 2022 when TerraUSD, a stablecoin meant to maintain a constant $1 price, collapsed. This led to the loss of nearly $45 billion in market capitalization within a week.
In Jan 2024, Terraform Labs filed for bankruptcy, revealing estimated liabilities and assets between $100 million and $500 million. Chris Amani, the CEO of Terraform Labs, highlighted that the bankruptcy filing was a crucial step to address legal challenges while allowing the company to pursue its shared goals.
Terraform Labs: SEC Settlement and Legal Challenges
In addition to the bankruptcy, Terraform faced a $4.47 billion settlement with the U.S. Securities and Exchange Commission (SEC) after being found liable for defrauding investors. The SEC had accused Terraform and Kwon of misleading investors about TerraUSD’s stability and making false claims about the Terra blockchain’s widespread use in a Korean mobile payment app.
A jury in Manhattan ruled in April that Terraform Labs and Do Kwon were liable for civil fraud. Before a damages trial, the company settled with the US regulator. Kwon, who faces related criminal charges in both the United States and South Korea, has denied any wrongdoing.
The winding down of Terraform Labs signals the end of one of the most significant collapses in cryptocurrency history, as investors, regulators, and courts continue to deal with the consequences of the company’s rapid rise and fall.
