U.S. court approves bankruptcy wind-down for Terraform Labs

Terraform Labs, the platform behind the collapsed stablecoin TerraUSD, has been approved by a U.S. court to wind down operations in bankruptcy on Thursday after agreeing to a $4.47 billion settlement with the U.S. Securities and Exchange Commission.

The seal of the U.S. Securities and Exchange Commission (SEC) is seen at their headquarters in Washington D.C. in 2021. [REUTERS]

Terraform Labs, the platform behind the collapsed stablecoin TerraUSD, has been approved by a U.S. court to wind down operations in bankruptcy on Thursday after agreeing to a $4.47 billion settlement with the U.S. Securities and Exchange Commission (SEC), according to Reuters.

U.S. Bankruptcy Judge Brendan Shannon approved Terraform Labs’ bankruptcy plan at a hearing in Delaware, calling it a preferable option over further legal action for investor losses.

Terraform Labs filed for bankruptcy in January. In June, the company reached a settlement with the SEC, who had sued Terraform Labs and its founder, Do Kwon, of “orchestrating a multibillion-dollar crypto asset securities fraud involving an algorithmic stablecoin and other crypto asset securities," after a jury in Manhattan found the company liable of defrauding investors in April.

The SEC, however, will likely not be able to see much of the settlement amount due to Terraform Labs' bankruptcy. The agency had agreed to be paid only after the firm fulfilled crypto loss claims as part of its bankruptcy wind-down. Terraform Labs said it could not give a number for the total value of crypto losses that could be paid as it liquidates.

The $4.47 billion settlement includes $4.05 billion in disgorgement plus interest and a $420 million civil fine. The company reached the settlement with the SEC before a trial that would have determined the damages resulting from TerraUSD and cryptocurrency Luna’s collapse in 2022.

The Singapore-based Terraform Lab’s Korean founder and CEO Kwon is currently detained in Montenegro. In August, the Balkan country’s appeals court ruled that Kwon be extradited to his native Korea to face criminal charges, not the United States.

The Montenegro Supreme Court ruled Saturday that the extradition of Kwon should be decided by Montenegro's Minister of Justice, essentially nullifying a lower court's decision to repatriate the founder and CEO back to Korea in August.

Update, September 22: Added the ruling by the Montenegrin Supreme Court.

BY KIM JU-YEON [kim.juyeon2@joongang.co.kr]