A U.S. court has approved the bankruptcy of Terraform Labs, the issuer of the virtual currency Terra and Luna, Reuters reported on the 19th (local time).
U.S. bankruptcy court judge Brendan Shannon in Delaware approved Terraform Labs’ bankruptcy plan, calling it a “welcome alternative” to respond to further lawsuits from investors.
Terraform Labs estimated it could pay virtual currency buyers and other investors between at least $184.5 million and up to $442.2 million as part of the bankruptcy liquidation.
Terraform Labs previously agreed to pay $4.47 billion in redemption and fines in a civil lawsuit filed by the U.S. Securities and Exchange Commission (SEC) in June.
But at the time, the SEC agreed that Terraform Labs would first settle its claim for virtual currency loss compensation as part of its bankruptcy settlement and then pay fines and other charges, so it would collect very little bankruptcy settlement, Reuters said.
Terraform Labs said it is currently impossible to estimate the total amount of virtual currency losses eligible for compensation during the liquidation process.
Earlier, the SEC filed a civil suit in November 2021, claiming that Kwon and Terraform Labs had deceived investors in relation to Terra stability, resulting in large investment losses, and that such fraudulent damages amounted to at least 40 billion won.
After hearing the lawsuit, the jury concluded that Terraform Labs and CEO Kwon Do-hyung were responsible, and Kwon and Terraform Labs agreed to settle with the SEC before the second phase of the trial to determine the amount of damages.
Kwon has been detained there since he was arrested in Montenegro in March last year on charges of falsifying his passport while fleeing South Korea in April 2022.
When Kwon was arrested in Montenegro last year, U.S. prosecutors in New York criminally charged him with eight counts, including securities fraud, fraud using telecommunications networks, commodity fraud and conspiracy to manipulate market prices.
Kwon is also indicted in Korea.
Both South Korean and U.S. law enforcement officials are demanding his extradition from the Montenegrin government, and where Kwon will be extradited has yet to be finalized.
JENNIFER KIM
US ASIA JOURNAL
