Terraform Labs Officially Receives Green Light From U.S. Bankruptcy Court to Commence Winding Down of Operations

This pivotal ruling follows the company's recent settlement with the U.S. Securities and Exchange Commission (SEC) over allegations of fraud tied to the catastrophic collapse of its TerraUSD stablecoin and LUNA token, which collectively erased $40 billion in value in 2022.

Terraform Labs, the entity behind the Terra [LUNA] ecosystem, has received approval from a U.S. bankruptcy court to begin winding down its operations. This decision comes after the company settled with the U.S. Securities and Exchange Commission (SEC) over allegations of fraud related to the spectacular collapse of its TerraUSD stablecoin and LUNA token, which resulted in a combined loss of $40 billion in value during 2022.

During a crucial Chapter 11 bankruptcy reorganization hearing on September 19, Judge Brendan Shannon supported Terraform's plan, describing it as a preferable option to prolonged legal disputes regarding investor losses.

According to a recent report by Reuters, Judge Shannon approved Terraform's bankruptcy plan during a hearing in Wilmington, Delaware, calling it a “welcome alternative” to further litigation over the investor losses.

For context, Terraform Labs, which filed for bankruptcy earlier this year, settled with the SEC for $4.47 billion after a jury found the company guilty of defrauding investors. However, the SEC will only receive payments from this settlement after Terraform fulfills its obligations to compensate investors for their crypto losses.

In the latest update, the company stated that it cannot currently estimate the total value of these losses.

Commenting on the same, Reuters stated,

“Terraform estimated that it will be able to pay between $184.5 million and $442.2 million to crypto purchasers and other stakeholders as part of its bankruptcy liquidation.”

Impact on Terra Luna Classic and Tera Luna's price

Despite the recent developments, Terra Luna Classic [LUNC]'s price did not initially show a negative reaction. As of the latest update, Terra Luna Classic was trading at $0.00008717, up 2.22% in the past 24 hours. Meanwhile, Terra Luna (LUNA) experienced a slight dip of 0.16%, trading at $0.3924, according to CoinMarketCap data.

However, shortly after the U.S. court's decision, Terra Luna Classic surged over 8%, reaching $0.00008743 with a 24-hour high of $0.00008829. The trading volume for Terra Luna Classic also spiked nearly 85%, hitting $26.17 million.

Meanwhile, LUNA's price increased by about 9% to $0.4033, with a 42% increase in trading volume to $47.12 million.