Terraform Labs Officially Closes Operations Due To Bankruptcy

Terraform Labs officially closed operations due to bankruptcy (Photo; Doc. Siamblockchain)

JAKARTA - Terraform Labs, a company that has starred in the crypto world, has now officially obtained court approval to close its operations in the bankruptcy process. After the Terra ecosystem collapsed in May 2022 and cost investors billions of dollars, this decision marked the final chapter of a fluctuating and controversial journey.

US Bankruptcy Judge Brendan Shannon, in a hearing in Delaware, approved the closure of Terraform Labs as part of the settlement of the Chapter 11 bankruptcy filed in January 2024. Judge Shannon called the shutdown a better step compared to extending a prolonged litigation. The company is experiencing heavy legal pressure following allegations of fraud against its investors, leading to a loss of about 40 billion US Dollars (Rp603 trillion) due to the fall of TerraUSD and Luna's two crypto assets developed by Terraform.

The US Securities and Exchange Commission (SEC) accused Terraform and its founder, Do Kwon, of misleading investors with false claims about the stability of the project. To end its legal battle, Terraform Labs reached an agreement with the SEC, agreeing to pay 4.47 billion US Dollars (Rp67 trillion) in settlement. However, before payments to the SEC can be made, the company must settle crypto claims involved in the bankruptcy process. Estimates state that eligible crypto-related losses in this case could range between 184.5 million US Dollars (Rp 2.7 trillion) to 442.2 million US Dollars (Rp 6.6 trillion).

The Terraform Labs case is a bitter reminder for investors of great risks in the crypto world. Quoted from Bitcoin.com News, Gary Gensler, SEC Chair, stressed that Terraform and Do Kwon's actions resulted in devastating losses, some investors even lost their entire life savings. This fraud highlights that when companies don't comply with the law, investors are the ones who suffer," Gensler said.

Before the court agrees to this closure, Terraform Labs is still operating in limited capacity, focusing on managing legal and financial obligations during the bankruptcy process. With this decision, the company will continue liquidation of assets and payments to eligible shareholders, closing the final chapter in the long history of this financial scandal.