- Terraform Labs has received U.S. bankruptcy court approval to wind down its operations following a settlement with the SEC over fraud allegations tied to the collapse of its TerraUSD stablecoin and LUNA token.
- This decision led to a surge in Terra Luna Classic and LUNA prices, reflecting market volatility and investor optimism.
Terraform Labs, the driving force behind the Terra [LUNA] ecosystem, has officially received approval from a U.S. bankruptcy court to wind down its operations. This landmark decision follows a significant settlement with the U.S. Securities and Exchange Commission (SEC) over accusations of fraud related to the dramatic collapse of its TerraUSD stablecoin and LUNA token, which wiped out $40 billion in 2022.
During a pivotal Chapter 11 bankruptcy reorganization hearing on September 19th, Judge Brendan Shannon endorsed Terraform’s plan, recognizing it as a more favorable resolution compared to extended legal battles over investor losses.
Key Insights from the Court Ruling
According to a recent report by Reuters, Judge Shannon’s approval of Terraform’s bankruptcy plan in Wilmington, Delaware, was deemed a “welcome alternative” to further litigation. 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 after Terraform fulfills its obligations to compensate investors for their crypto losses.
Currently, Terraform Labs has been unable to estimate the total value of these losses. As noted by Reuters, “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.”
Market Reaction: Terra Luna Classic and LUNA Prices Surge
Despite the legal turmoil, Terra Luna Classic [LUNC] and LUNA have shown resilience in the market. Initially, Terra Luna Classic’s price remained stable, trading at $0.00008717, a 2.22% increase over the past 24 hours. Terra Luna [LUNA], on the other hand, experienced a slight dip of 0.16%, trading at $0.3924, as per CoinMarketCap data.
However, the U.S. court’s decision triggered a significant surge in Terra Luna Classic’s price, jumping over 8% to $0.00008743 and reaching a 24-hour high of $0.00008829. The trading volume for Terra Luna Classic also soared by nearly 85%, hitting $26.17 million. Similarly, LUNA saw a price increase of approximately 9% to $0.4033, with a 42% rise in trading volume to $47.12 million.
The approval of Terraform Labs’ bankruptcy plan marks a critical turning point for the company and the broader Terra ecosystem. While the road ahead involves substantial efforts to compensate investors and settle with the SEC, the recent market reaction suggests a degree of optimism among investors and stakeholders. As the situation evolves, all eyes will be on how Terraform Labs navigates its bankruptcy proceedings and its impact on the cryptocurrency market.
