Reuters reported on September 19 that TerraForm Labs had received court permission to wind down its operations through bankruptcy after settling a lawsuit with the U.S. Securities and Exchange Commission (SEC).
U.S. Bankruptcy Court Judge Brendan Shannon approved TerraForm Inc.'s bankruptcy plan in Wilmington, Delaware, calling it a “welcome alternative” to further litigation over investor losses. The court's approval marks the final step in TerraForm's bankruptcy proceedings, which began in January.
TerraForm agreed to pay a $4.47 billion fine and settle with the SEC after a jury found the company liable for investor fraud in April. The investigation estimated that the company defrauded investors out of $40 billion when the Terra Ecosystem collapsed in 2022.
Terraform co-founder Do Kwon was also found liable to pay $110 million of the settlement, plus $14.3 million in prejudgment interest.
Additionally, he must transfer various assets, including ownership of his PYTH tokens and other holdings, to the Terraform bankruptcy estate, which will be used to pay financial penalties and distribute them to affected investors through a liquidation trust.
Notably, the settlement amount will only be paid to regulators after Terraform reimburses all losses claimed during the liquidation process, so the SEC may not ultimately recover any money.
The company said it may pay between $184.5 million and $442.2 million to cryptocurrency buyers and other interested parties in the bankruptcy proceedings. The total amount of eligible cryptocurrency losses remains “unestimable,” TerraForm said.
Terraform has been preparing for its shutdown since early September when it moved approximately $63 million worth of Bitcoin (BTC) to a new address.
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