SEC Updates Terraform Labs Victims Post-$4.5B Settlement Deal

• The legal battle between the SEC and Terraform Labs recently concluded.
• There’s an update for investors affected by the Terra Luna crash
• Do Kwon owes hundreds of millions in debt to investors and the SEC.

The collapse of Terra Luna was one of the most tumultuous chapters in the industry, wiping out billions of dollars. The weight of the financial implosion prompted regulatory scrutiny by the Securities and Exchange Commission (SEC) , aiming to uncover the fraudulent scheme that left investors at a loss.

Following the recent conclusion of the legal proceedings between the SEC, Terraform Labs, and its founder, Do Kwon, the regulatory commission has released key details focused on impacted investors.

Notice for Terraform Labs Creditors

A recent update on the SEC’s website has provided information for creditors affected by the Terraform Labs crash. According to the commission, Terraform owes $4,473,828,306 in disgorgement, prejudgment interest, and civil penalties, deemed satisfied by payments to creditors through the firm’s pending bankruptcy case.

As part of the settlement, Kwon must transfer a total of $204,320,196 to the Terraform bankruptcy estate. This includes $7 million in cash, all crypto assets of the Luna Foundation Guard, as well as Kwon’s PYTH crypto asset tokens,

The assets will contribute to the compensation of affected investors. The commission also emphasized that it will not receive any payments until investors and creditors are paid in full. 

Additionally, Terraform will seek approval for a liquidating Chapter 11 bankruptcy plan, establishing a liquidating trust to manage and process the creditor settlement process. The plan will detail recovery rights for all creditors and investors, allowing them to review, vote, or object during the bankruptcy proceedings. 

Terraform Labs also recently shared details on how creditors file claims to recover their lost assets.

How to File a Claim with Terraform Labs 

According to the firm’s recent update , individuals or entities owed assets can file claims for the Chapter 11 bankruptcy case. The deadline to submit claims for inclusion in the upcoming voting process is August 21, 2024, at 5:00 PM ET.

To file a claim, creditors must provide a Preliminary Crypto Loss Proof of Claim in English, with amounts denominated in U.S. dollars. Additionally, they can file claims electronically through the site or by mail to the provided address.

Terraform Labs stated that claimants must sign all claims themselves, as proxies or third parties cannot file on behalf of a creditor.

The firm added that missing the preliminary crypto loss form submission does not exclude clients from submitting the main crypto loss form. However, such claimants cannot vote on the settlement process.

On the Flipside

• After Terra’s bankruptcy plan becomes effective, users will have a 30-day window to redeem their wrapped assets from the bridge.
• Terra’s native governance coin, LUNA. lost 99% of its value and nosedived from $24.14 to $0.1538
• Terraform Labs founder Do Kwon is still in Montenegro.

Why This Matters

The Terra Luna crash caused significant losses for a large number of investors, and the SEC’s prioritization of impacted investors could expedite the settlement process and provide a quicker resolution for those awaiting compensation

Read more about the legal battle between the SEC and Terraform Labs in this article:
Judge Backs SEC in Battle Against Do Kwon & Terraform Labs

The decade-long wait for Mt. Gox’s settlement has reportedly been worth it for some; read this article to find out more:
Mt. Gox Clients Reportedly Become Millionaires a Decade after Losing It All