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Terraform Labs Opens Crypto Claims Portal for Bankruptcy Creditors

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  • Terraform Labs opens claims portal for crypto creditors on March 31.
  • Creditors must submit claims by April 30, 2025, for consideration.
  • Terraform plans up to $442M repayment to creditors after bankruptcy.

Terraform Labs has launched a claims portal system to help manage compensation payments for creditors affected by its 2022 collapse. Eligible creditors can use the portal from March 31 until April 30, 2025 to submit their claims. Terraform Labs declared Chapter 11 bankruptcy in January 2024 when its $40 billion ecosystem failed.

Terraform Labs  “Crypto Loss Claims Portal”

Creditors need to use the “Crypto Loss Claims Portal” to file claims to be considered. The company stressed that all claims past April 30, 2025 will automatically be disregarded. Terraform Limited will process claims from creditors who will submit sufficient documentation to demonstrate their ownership of digital assets.

A formal claim needs evidence that meets specific guidelines. The required documentation includes native wallet addresses for crypto stored under self-custody and read-only API keys for cryptocurrency stored on exchanges. Terraform Labs will accept additional information such as transaction logs and account statements but indicates this documentation can lead to reduced speed in processing claims.

All creditors must receive their initial claim amount within 90 days after the April 30 deadline. Each creditor may choose to accept or dispute the determined payment amount. The company will initiate distribution payments as soon as it processes claims and the funds will be distributed proportionally to all creditors.

Terraform Labs Settlement and Compensation Scheme

The company expects to repay creditors an estimated sum of $185 million to $442 million. A U.S. Bankruptcy Judge Brendan Shannon has authorized these funds as part of a reorganization plan. Terraform Labs implemented its reorganization plan after its $4.47 billion settlement with the Securities and Exchange Commission (SEC) in 2024.

However, the substantial SEC settlement will not influence the payments made to creditors. Terraform Labs made a commitment to pay their creditor debts before any payments to the SEC. This agreement ensures that company creditors receive payments from the company’s reorganization before any financial settlements are made to the regulator.

The company has exempted certain assets from its compensation scheme. Terraform Labs’ compensation scheme excludes both crypto tokens with on-chain balances lower than $100 and Luna 2.0 tokens. All creditors should review the Crypto Loss Claim Procedures on the portal to understand the requirements for eligible claims.

Terraform Labs has launched its claims portal as part of the ongoing bankruptcy process. The company seeks to compensate creditors who lost funds after TerraUSD (UST) and LUNA Token collapsed. 

Galaxy Digital Settles for $200M Over Terra Promotion Fallout

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  • Galaxy Digital to pay $200M after promoting Terra without disclosure.
  • Settlement resolves claims of market manipulation and false disclosures.
  • Settlement will be paid over three years, starting with $40M.

As part of its settlement with the New York Attorney General Galaxy Digital has agreed to pay $200 million. The settlement results from accusations about Galaxy Digital’s role in undisclosed promotion of collapsed cryptocurrency Terra (LUNA). The company allegedly deceived investors through false statements about how the project operated and its connection with South Korean application Chai.

LUNA Collapse

The documents submitted on March 24, 2025 showed that Galaxy Digital acquired 18.5 million LUNA tokens at a price that was 30% below market value. Terraform Labs supplied the tokens to Galaxy Digital in October 2020. The promotional activities conducted by Galaxy triggered an immense price growth which propelled LUNA from $0.31 to $119.18 between October 2020 to April 2022.

The filed documents indicate that Galaxy Digital did not disclose to the public the LUNA tokens sales. Additionally, the company published false reports which indicated that Terra blockchain operated within the Chai system. The statements emerged from false information provided by Terraform Labs and its founder Do Kwon.

The Terra collapse in May 2022 resulted in huge financial losses such as the loss of billions of dollars in market capitalization. The collapse triggered a failure in the TerraUSD (UST) stablecoin stabilization mechanism which led to loss of value in LUNA This event led to a collapse in the cryptocurrency market.

Galaxy Digital Settlement

Michael Novogratz, CEO of Galaxy Digital, described the settlement as a difficult decision. Novogratz declared that this agreement would enable the company to concentrate on long-term development of digital assets and artificial intelligence. This settlement resolves claims about market manipulation and failure to properly disclose information.

The promotional efforts by Galaxy Digital artificially raised the price of LUNA tokens. The company sold its entire token ownership but did not share the disclosures with its investors. The settlement requires Galaxy to distribute $200 million over three years with detailed payment timelines for the next few years.

The payment terms of Galaxy Digital require an initial $40 million installment which must be paid within the first 15 days. Another $40 million must be paid within a year from the first payment. The rest will be paid on annual installments of $60 million each for the next for the second and third years. The settlement addresses legal disputes which enables Galaxy Digital to proceed with its business goals.

Montenegro Finally Approves Do Kwon’s Extradition to the U.S

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  • Do Kwon faces charges over the $40B Terra-Luna collapse.
  • Montenegro’s court rejects Kwon’s appeal, clearing extradition.
  • Terraform Labs agrees to pay $4.47B in U.S. SEC settlement.

After months of legal disputes, Montenegro has cleared the path for Do Kwon’s extradition to the United States. The founder of Terraform Labs faces charges related to the $40 billion collapse of the Terra-Luna blockchain.

Do Kwon’s Extradition

Montenegro has approved the extradition of Do Kwon, the founder of Terraform Labs, to the United States. This decision comes after months of legal battle between the U.S. and South Korea over Kwon’s involvement in the collapse of the Terra-Luna blockchain. The ruling marks the conclusion of a long and complicated legal battle that started after Kwon was arrested in Montenegro in March 2023.

Kwon faces charges related to the $40 billion collapse of TerraUSD and Luna, which affected investors across the world. He is accused of misleading investors and participating in financial fraud, leading to the downfall of Terraform Labs. Montenegro’s decision to prioritize the U.S. extradition request came after a lengthy legal process and multiple reversals in court.

Montenegro’s Constitutional Court recently rejected Kwon’s appeal, clearing the way for his extradition. The country’s Justice Minister, Bojan Bozovic, confirmed that the U.S. request met most of the legal criteria for extradition. The U.S. had presented a strong case against Kwon, which contributed to the final decision.

South Korea had also requested Kwon’s extradition, but Montenegro sided with the U.S. The U.S. prosecutors argue that Kwon’s actions in the collapse of Terra-Luna caused significant financial harm. They have also raised concerns over Kwon’s alleged attempt to hide his assets and mislead investors.

Terraform Labs Collapse

The extradition decision is a critical development in the broader investigation into the collapse of Terraform Labs. Kwon had initially fled to Serbia before moving to Montenegro after the crash in 2022. However, Kwon and his associates were eventually arrested in March 2023, with Kwon using fake documents in an attempt to travel to Dubai.

Additionally, Terraform Labs reached a settlement with the U.S. Securities and Exchange Commission and agreed to pay a $4.47 billion fine. Terraform Labs has also filed for bankruptcy protection in the U.S., and a bankruptcy judge recently authorized the sale of its remaining assets.

This case shows the increased scrutiny and legal challenges facing the cryptocurrency industry. Kwon’s extradition could serve as a major step where individuals are held accountable for fraudulent activities in the cryptocurrency sector. The U.S. authorities have emphasized the need to enforce legal norms and punish financial fraud in the digital asset space.

Terraform Labs Challenges SEC $5.3B Fine for TerraUSD and Luna Collapse

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Terraform Labs, the firm behind the­ algorithmic stablecoin, challenging the substantial fine­ sought by the US Securities and Exchange­ Commission (SEC). After being found liable for fraud in April 2024, Te­rraform Labs is now contesting a $5.3 billion penalty, asserting that most of the­ir operations occurred outside the­ jurisdiction of the United States, according to Bloomberg.

The­ substantial penalty recommendation originate­s from the SEC’s legal action against Terraform Labs and Do Kwon, the­ initiative’s co-creator. The re­gulatory body contends that the 2022 collapse of UST, de­signed to maintain parity with the US dollar, led to a stagge­ring $40 billion investor loss, causing ripples throughout the cryptocurre­ncy market.

Terraform Labs’ Defense Strategy

Terraform Labs’ defense hinges on the location of their token sales. Their lawyers argue that offers and sales of tokens occurred almost entirely outside the US. They further emphasize the lack of evidence presented by the SEC to demonstrate that Terraform Labs or Do Kwon’s limited US activity directly caused the billions in investor losses.

This defence strategy raises a crucial question: can a company avoid legal repercussions in a specific region by conducting most of its business elsewhere? The SEC, unsurprisingly, disagrees. They view the fine as a necessary deterrent against “brazen misconduct” and have requested the court to deliver “an unequivocal message” that such actions will not be tolerated within the US financial landscape.

The $4 billion in “ill-gotten gains” the SEC alleges Terraform Labs and Do Kwon obtained from unregistered sales of LUNA and UST tokens adds another layer of complexity. While Terraform Labs maintains their sales primarily occurred overseas, the SEC likely argues that the impact on US investors necessitates regulatory action.

SEC Pursues Global Crypto Regulation Challenges

The SEC’s actions show the­ difficulties of governing the worldwide­ crypto market, frequently operate­ across borders, resulting in intricate jurisdictional issue­s. Despite most transactions occurring abroad, the SEC’s pursuit of fine­s against Terraform Labs shows regulators’ increase­d determination to hold international crypto firms answe­rable for activities impacting the US.

Do Kwon’s legal counse­l adopted a comparable strategy, conte­nding that his endeavours with Terraform Labs did not have a “foreseeable substantial effect” within the United State­s. This stance shows the­ global nature of the crypto industry and the ongoing discourse­ concerning the establishme­nt of clear legal frameworks across borders.

The judge­’s ruling regarding Terraform Labs’ penalty will garne­r great interest from the cryptocurre­ncy industry. A substantial fine could establish pre­cedents for tougher re­gulations and enforcement on global crypto firms. This may impact future­ innovations and investments within the industry.

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SEC Proposes $5.3 Billion Fine on Terraform Labs and Co-founder Do Kwon

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The US Securities and Exchange­ Commission (SEC) seeks an immense­ $5.3 billion penalty against Terraform Labs and its co-founder, Do Kwon. This stagge­ring fine would be the highe­st ever imposed in the­ cryptocurrency sector, signalling a potential shift in how re­gulators approach the rapidly growing digital asset market.

The SEC see­ks $4.2 billion in disgorgement, esse­ntially asking for the return of “ill-gotten gains” Kwon and Terraform allegedly made from unre­gistered sales of LUNA and UST toke­ns. Additionally, the agency reque­sts $545.7 million in prejudgment intere­st. This substantial sum reflects the SEC’s be­lief that Kwon and Terraform bene­fited from their actions for a significant period.

Terraform Labs faced $420 million in civil penaltie­s, while Do Kwon personally faced $100 million in pe­nalties. These fine­s, though smaller than the disgorgeme­nt amount, send a strong warning to potential bad actors in the crypto space­. Notably, the proposed penalty e­xceeds the re­cord $4.3 billion settlement paid by Binance­ in November 2023 for anti-money launde­ring and sanctions violations.

SEC Targets Do Kwon with Permanent Ban

The SEC wants more than just fines from Do Kwon. The­y’re asking a court to permanently ban him from le­ading any public company. This move aims to stop Kwon from having major sway in finance if the claims against him prove­ true. Furthermore, the­ SEC demands Kwon provide a detaile­d account of his assets. This information could help recove­r funds lost by investors.

The attorne­ys representing Kwon and Te­rraform Labs have challenged the­ SEC’s assertions. Their defe­nse rests on the conte­ntion that token transactions transpired outside the­ US, thus escaping federal se­curities regulations. This legal clash will like­ly dictate the ultimate re­solution and establish a precede­nt for upcoming regulatory actions within the cryptocurrency re­alm.

The SEC has take­n an aggressive stance towards cryptocurrency oversight, sparking debate­s about regulatory implications. Certain expe­rts express concerns that stringe­nt measures could hinder innovation progre­ss. In contrast, others view it as a crucial step to re­build investor trust and avoid comparable failures.

Legal Turmoil Threatens Terraform Labs’ Future

Do Kwon’s current scenario brings an additional layer of intricacy­. He was taken in Montene­gro in 2023 for having a fake passport. He waits to be se­nt to either the U.S. or South Kore­a, where he also face­s criminal charges of fraud. The combined force­ of the SEC’s civil case and possible criminal charge­s makes the situation look terrible for Kwon and Te­rraform Labs.

This legal situation holds immense­ potential to leave a lasting mark on the­ cryptocurrency industry. The substantial proposed fine, coupled with the ongoing legal conflicts, highlights the­ increasing regulatory oversight surrounding digital asse­ts.

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Terraform’s Aggressive Legal Standoff: SEC’s $166M Allegations Not Sturdy Enough

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Terraform Labs, embroiled in a legal battle with the U.S. Securities and Exchange Commission (SEC), asserts its right to retain Dentons U.S. LLC as its counsel amidst objections from the regulatory body. The dispute centers on Terraform’s payment of $166 million to legal representatives, with the SEC alleging dubious fund transfers to evade potential liabilities.

In response, Terraform filed a robust defense in a Delaware court, challenging the SEC’s objections as baseless and accusing the regulatory body of overreach. The company emphasizes the necessity of legal representation to navigate both the SEC litigation and a concurrent Department of Justice investigation.

Highlighting what it perceives as government interference, the firm contends that the SEC’s objections aim to divert attention from the impending trial. Furthermore, the company refutes the SEC’s allegations, asserting erroneous legal interpretations and false claims.

As the legal saga unfolds, Terraform’s battle against the SEC underscores the complexities and tensions inherent in corporate bankruptcy proceedings. The outcome of this confrontation will not only shape the firm’s future but also set precedents in regulatory oversight and corporate governance.

SEC Concerns Over Terraform’s Finances

The U.S. Securities and Exchange Commission (SEC) has taken a firm stance against Terraform Labs’ retention of Dentons U.S. LLC as its special counsel, citing concerns over dubious financial transactions. In a filing submitted to the Delaware bankruptcy court, the SEC raised alarm over the firm’s transfer of a substantial $166 million to Dentons, labeling the move as “suspicious.”

Of particular concern to the SEC is the transfer of $122 million within 90 days before Terraform’s bankruptcy filing, which the agency alleges was intended to deplete the company’s assets and hinder potential payouts resulting from SEC enforcement actions. The SEC further accused Terraform of utilizing an “opaque slush fund” within Dentons to finance legal battles against the regulatory body, branding it a “war chest” for ongoing disputes.

Despite a significant portion of the funds already being exhausted on litigation expenses, $81 million remains in the Dentons Advance Payment Retainer, according to SEC filings. The agency contends that Dentons should not continue representing Terraform unless the remaining funds are returned.

Moreover, the SEC highlighted the purported misuse of funds, alleging that Denton’s retainer was utilized for legal fees related to Terra’s former CEO’s unrelated criminal actions in Montenegro. Requesting court intervention, the SEC seeks the appointment of a fee examiner to investigate the suspicious timing and amount of the retainer payment, signaling a deepening rift between Terraform Labs and regulatory authorities.

Terraform Labs’ Do-or-Die Battle With SEC

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Terraform Labs, currently entangled in a securities fraud case with the U.S. Securities & Exchange Commission [SEC], sees a potential lifeline in its recent bankruptcy filing. The firm, accused of conducting an unregistered securities offering for U.S. citizens, faces a crucial trial scheduled for March. Chris Amani, the head of company operations, conveyed in a court filing that the financial burden of the litigation was insurmountable, stating, “The exact size of a money judgment remains unknown, but it could very well outstrip the debtor’s assets.”

To pursue a critical “do-or-die” appeal, the firm would be required to post a bond equivalent to 110% of the total judgment value. However, Terraform Labs posits that filing for Chapter 11 bankruptcy would allow them to proceed with the appeal without having to provide a bond. Amani highlighted the significance of Chapter 11 protection, asserting that without it, the company might be forced to liquidate after the trial.

Terraform labs
Terraform Labs' Do-or-Die Battle With SEC 2

Despite the challenging circumstances, Terraform Labs remains resolute in its stance that the SEC lacks jurisdiction over the firm, arguing that its cryptocurrency tokens do not fall under the category of “securities.”

Terraform Debts

In terms of financial standing, the company, responsible for one of the most substantial crypto crashes in recent history, unveiled a snapshot in its recent court filing. The disclosure includes an estimated $28 million in Bitcoin, $7 million in various cryptocurrencies, and roughly $87 million in its proprietary token, Luna. The bankruptcy protection filing, dated January 21, reveals the company’s estimated liabilities and assets, ranging between $100 million and $500 million.

Terraform Labs, founded by Do Kwon and Daniel Shin, achieved prominence for its Terra blockchain protocol and algorithmic stablecoin payment platform before experiencing a dramatic crash that wiped out nearly $45 billion of market capitalization within a week. Amidst the backdrop of the challenging legal landscape, Chris Amani, the CEO, emphasized the resilience of the Terra community and ecosystem, framing the bankruptcy filing as a strategic move to address legal challenges while enabling the pursuit of collective goals.

Do Kwon’s Terraform Labs Files Bankruptcy: $500M Debt Unveiled

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Do Kwon’s Terraform Labs [TFL], the firm behind one of the most significant crypto crashes in recent history, has filed for bankruptcy protection in the United States. The filing, dated January 21, reveals that the company is facing estimated liabilities and assets ranging between $100 million and $500 million. The move comes as TFL grapples with legal challenges, including ongoing litigation in Singapore and a case with the U.S. Securities and Exchange Commission [SEC].

Chris Amani, the CEO of Terraform Labs, emphasized the resilience of the Terra community and ecosystem in the face of adversity. Amani stated that the bankruptcy filing is a necessary step to address legal challenges while enabling the company to pursue its collective goals.

Do Kwon
Do Kwon's Terraform Labs Files Bankruptcy: $500M Debt Unveiled 4

Terraform Labs plans to execute its business plan during the bankruptcy proceedings, allowing it to navigate the representative litigation in Singapore and the SEC-related legal issues in the United States. The company, co-founded by Do Kwon and Daniel Shin, gained prominence for its Terra blockchain protocol and payment platform for algorithmic stablecoins.

The troubles for TFL began in 2022 when its cryptocurrency token, Luna, and stablecoin, TerraUSD [UST] experienced a catastrophic collapse. UST broke its peg to the U.S. dollar, plummeting to 10 cents, while Luna fell from an all-time high of $119.51 to “virtually zero.” The crash erased nearly $45 billion of market capitalization within a week.

Do Kwon Braces for March Trial

Legal actions followed the collapse, with jurisdictions in Korea, Singapore, and the United States initiating proceedings against Do Kwon and his team. Both the South Korean and American governments have formally requested Kwon’s extradition.

In a recent development, the SEC won a partial victory in its lawsuit against Terraform Labs. U.S. District Court Judge Jed Rakoff ruled that TFL and co-founder Do Hyeong Kwon violated securities laws by offering and selling unregistered digital tokens. The SEC has agreed to postpone Do Kwon’s civil trial, allowing for his extradition and participation in the proceedings.

The delay, requested by Kwon’s lawyer, has been deemed justified by the SEC, with the trial now expected to take place no earlier than March 18. Importantly, there won’t be separate trials for Terraform and Kwon to avoid imposing an unnecessary burden on whistleblowers and retail investors.

Do Kwon: SEC Okays Delay, No Separate Trials

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The U.S. Securities and Exchange Commission has agreed to postpone Do Kwon’s civil trial, allowing the indicted co-founder of Terraform Labs to be extradited and attend the proceedings. The request for a delay until at least March 18, made by Kwon’s lawyer, was deemed justified by the SEC in a recent filing in a Manhattan federal court. The regulator characterized the requested adjournment as “modest.” Importantly, there won’t be separate trials for Terraform and Kwon, as this would necessitate whistleblowers and retail investors to testify twice, an unnecessary burden.

Kwon’s legal representation earlier assured the court that they wouldn’t seek further adjournments even if Kwon couldn’t attend on the new proposed date. In case the court rejects the plea for a further delay, Kwon’s counsel requested that the jury be informed that his absence and inability to testify should not be considered unduly prejudicial to him.

Do Kwon
Source: Inner City Press

The SEC, facing scheduling conflicts, proposed April 15 as a suitable date for the trial. The ultimate decision lies with U.S. District Judge Jed Rakoff, who will determine whether to move the trial date. These developments set the stage for Do Kwon’s potential extradition to the U.S. by mid-March to face charges related to an alleged $40 billion cryptocurrency fraud scheme.

Do Kwon’s Trial Drama Unfolds in Global Jurisdictions

The collapse of TerraUSD, the stablecoin developed by Terraform Labs in May 2022, represented a significant setback for the crypto industry, causing substantial losses for investors. Legal actions were initiated against Do Kwon and his team in multiple jurisdictions, including Korea, Singapore, and the United States, following TerraUSD’s collapse. Both the South Korean and American governments have formally requested Kwon’s extradition.

In the previous month, a U.S. court ruled that Terraform and Do Kwon violated U.S. law by failing to register TerraUSD and Luna. The trial, initially scheduled for late January, is characterized by legal maneuvering, with both parties filing for summary judgment, urging the federal judge to rule in their favor without a trial. Each side contends that the other has inadequately substantiated its case.

SEC Wins Partial Victory Against Terraform Labs In Crypto Securities Case

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The Securities and Exchange Commission (SEC) has won a partial victory in its lawsuit against Terraform Labs, which develops blockchain-based platforms and tokens. Judge Jed Rakoff in the U.S. District Court ruled on Thursday that Terraform Labs and its co-founder Do Hyeong Kwon violated securities laws by offering and selling unregistered digital tokens.

Judge Jed Rakoff granted summary judgment for the SEC on that issue, finding that Terraform’s tokens – UST, LUNA, wLUNA, and MIR – are securities because they are investment contracts. However, the judge also ruled in favor of Terraform on another issue involving the claims that it offered and effected transactions in security-based swaps without complying with the registration and reporting requirements of the securities laws.

The judge found that Terraform’s products, called “mAssets”, are not security-based swaps but rather synthetic tokens that track the price of real-world assets, such as U.S. company stocks. The judge said that mAssets do not involve the actual delivery or exchange of the underlying securities and, therefore, do not fall under the definition of security-based swaps.

Terraform Accused Of Massive Crypto Fraud

The judge also denied motions from both parties for a summary judgment on the fraud claims, which allege that Terraform and Kwon engaged in a “multi-billion dollar crypto asset securities fraud” by making false statements to investors and the public about their products and platforms. The judge said that there are disputed issues of fact and credibility that need to be resolved by a jury.

The SEC filed its lawsuit against Terraform and Kwon in February, accusing them of orchestrating a scheme to raise billions of dollars from investors by offering and selling an inter-connected suite of crypto asset securities, with many transactions being unregistered.

The SEC said that the defendant’s flagship product, Terra USD, was an algorithmic stablecoin that was supposed to maintain a stable value of one U.S. dollar but collapsed in May last year, wiping out billions of dollars of investors’ money. Terra USD was linked to Luna, a governance token that was used to stabilize the price of Terra USD through market incentives and algorithms.

The SEC also said that Terraform created and sold other tokens, such as wLUNA and MIR, that were designed to provide exposure to various asset classes, such as stocks, commodities, and cryptocurrencies, through mAssets. The SEC aims for legal action, recovery of profits, and permanent bans on Terraform and Kwon. A jury trial for the remaining claims will start on Jan. 24, 2024.

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