Terraform Labs, the mastermind behind the Terra [LUNA] ecosystem, has been officially granted permission by a U.S. bankruptcy court to begin the process of winding down its operations.
This significant decision comes in the wake of the company’s recent settlement with the U.S. Securities and Exchange Commission (SEC) following accusations of fraudulent activities linked to the dramatic collapse of its TerraUSD stablecoin and LUNA token, resulting in a combined loss of $40 billion in value in 2022.
During a crucial hearing for Chapter 11 bankruptcy reorganization on September 19th, Judge Brendan Shannon approved Terraform’s proposal, deeming it a more favorable resolution to protracted legal disputes over investor losses.
Analysis of the Situation
According to the most recent report from Reuters, Judge Shannon endorsed Terraform’s bankruptcy plan during a hearing in Wilmington, Delaware, referring to it as a “positive alternative” to further legal battles concerning investor losses.
For background, Terraform Labs, which initiated bankruptcy proceedings earlier this year, reached a settlement with the SEC amounting to $4.47 billion after a jury found the company guilty of deceiving investors.
Nonetheless, the SEC will only receive its share from this settlement after Terraform fulfills its commitments to compensate investors for their crypto-related losses.
At present, the company has stated its inability to accurately assess the total value of these losses.
Reuters reported,
“Terraform estimated that it will be able to pay between $184.5 million and $442.2 million to cryptocurrency buyers and other concerned parties as part of its bankruptcy liquidation.”
Impact on Terra Luna Classic and Terra Luna’s Value
Despite the recent developments, the price of Terra Luna Classic [LUNC] did not initially exhibit a negative response.
As per the latest data, Terra Luna Classic was being traded at $0.00008717, reflecting a 2.22% increase over the past 24 hours.
On the other hand, Terra Luna [LUNA] saw a minor decrease of 0.16%, with a trading value of $0.3924, as reported by CoinMarketCap.
However, following the decision by the U.S. court, Terra Luna Classic witnessed a surge of over 8%, reaching $0.00008743 and hitting a 24-hour high of $0.00008829.
The trading volume for Terra Luna Classic also saw a sharp increase, rising by almost 85% to $26.17 million.
Similarly, LUNA experienced a rise in price of around 9% to $0.4033, alongside a 42% surge in trading volume, amounting to $47.12 million.