Terraform Labs receives bankruptcy nod: A turning point?

• Terraform Labs approved to wind down amid SEC settlement and bankruptcy proceedings.
• Terra Luna Classic and LUNA prices surge post-court decision, reflecting market volatility.

Terraform Labs, the architect of the Terra [LUNA] ecosystem, has officially received the green light from a U.S. bankruptcy court to commence the winding down of its 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.

During a crucial Chapter 11 bankruptcy reorganization hearing held on the 19th of September, Judge Brendan Shannon endorsed Terraform’s plan, deeming it a preferable solution to prolonged legal disputes regarding investor losses.

What are the reports suggesting?

As per Reuters’ latest report, Judge Shannon approved Terraform’s bankruptcy plan at 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, has 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.

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

Remarking on the same, Reuters said,

“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 show a negative reaction initially.

As of the latest update, Terra Luna Classic was trading at $0.00008717, reflecting a 2.22% increase 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 and peaking at a 24-hour high of $0.00008829.

The trading volume for Terra Luna Classic also spiked nearly 85%, hitting $26.17 million.

Similarly, LUNA saw a price increase of approximately 9% to $0.4033, accompanied by a 42% rise in trading volume to $47.12 million.