Terraform Labs, the Singapore-based blockchain company released their Crypto Loss Claims Portal during their ongoing settlement process with U.S. Securities and Exchange Commission (SEC). After Terra’s bankruptcy fell apart the portal system will become active for interested claimants starting March 31.
Terraform Labs has given April 30, 11:59 PM ET as the deadline for creditors to submit Crypto Loss Claims through their portal. The payout depends on Eligible Loss Cryptocurrency value but Luna 2.0 on Terra 2.0 and crypto assets below $100 are excluded.
SEC Alleges Terraform Labs Misled Investors on Stability
The portal opened for claiming after Terraform entered Chapter 11 bankruptcy protection in the USA during January 2024. During this process the company revealed asset and debt levels between $100 million and $500 million.
The corporation completed its reorganization through a $4.47 billion settlement with Securities and Exchange Commission in 2024 making its wind-down procedure viable for approval by a U.S. bankruptcy court.
Terraform Labs faced financial ruin because of scams linked to TerraUSD (UST) collapsing as an algorithmic stablecoin. The SEC charged Terraform and Do Kwon in 2021 with lying about how UST maintained its peg price of $1.
According to the SEC investigation Do Kwon and Terraform Labs intentionally used outside funds to make UST purchases yet declared it was successfully rescued by their algorithm. The SEC charged Terraform Labs for making false statements about blockchain technology integration into Chai mobile payments despite its absence from the system.
Terra’s Collapse Sparked Market-Wide Panic
Alexander Svanevik playing a major role at Standard Crypto and Ashley Swaren serving as a commercial lead at TokenTerminal now head the list of biggest unsecured creditors from Terraform Labs’ collapse. Through the claims portal Terraform serves the claim applications of all investors before completing its bankruptcy obligations.
In May 2022 Terra blockchain failed with $40 billion worth of value because TerraUSD did not stay tied to the US dollar value anymore. UST differed from other stablecoins because it used a burning and creation process alongside LUNA. Large amounts of money taken from Anchor Protocol created panic that caused UST to drop its price and produced a major sell-off throughout the market.
To stabilize UST Terraform Labs created more LUNA which triggered its price to crash from $80 to zero. Deploying $3 billion worth of Bitcoin into reserve did not save the collapsing project. Do Kwon received his arrest in March 2023 which led to his US extradition on fraud accusations.
The Terra collapse caused significant market declines and brought more oversight from regulators to algorithmic stablecoins markets. Terraform takes a substantial step in handling its debts and resolving crypto history challenges by opening its Crypto Loss Claims Portal.