Terraform Labs Mulling Shutting Down Post-SEC Settlement

By TheCoinrise Media
about 1 month ago
UTED LUNC SEC LUNA BILL

Terraform Labs plans to shut down its operations following a settlement with the U.S. Securities and Exchange Commission (SEC). According to a post on X, CEO Chris Amani announced that the firm plans to dissolve, selling off its projects within the Terra ecosystem, including Pulsar Finance, Station Wallet, and Enterprise DAO.

Terraform Labs Prepares a Community Proposal

This decision comes after a tumultuous period for Terraform Labs, marked by regulatory scrutiny and market challenges. Despite the company’s dissolution, Amani has emphasized that the Terra and Terra Classic blockchains have the potential to continue under community control. This suggests that while Terraform Labs will no longer be at the helm, the underlying technology and its associated projects could thrive if the community takes the reins.

Additionally, the company is preparing a community proposal to incinerate all unvested Luna, the native token of Terraform. Amani stated that any remaining tokens vested in wallets will be burned by Terraform Labs, demonstrating a firm commitment to sever the company’s direct ties to the token.

This move underscores the broader trend of regulatory pressures shaping the crypto industry’s landscape. As Terraform Labs prepares to close this chapter, the future of Terra and Terra Classic lies in the hands of its community, presenting a new era of decentralized management and potential growth for the ecosystem.

SEC Seeks Billion in Penalties From Terraform Labs

In April, the US SEC filed a motion requesting billions of dollars in disgorgement and civil penalties against Terraform Labs and its co-founder, Do Kwon, following a verdict in its civil case. 

In a filing in the United States District Court for the Southern District of New York, the SEC requested approximately $4.7 billion in disgorgement and pre-judgment interest after the civil case ruling, along with a combined $520 million in civil penalties: $420 million from Terraform and $100 million from Do Kwon. 

In addition to the monetary judgment, the SEC was proposed to bar Kwon from serving as an officer or director of a securities issuer and providing complete details of his accounts and assets. Terraform would also face a conduct-based injunction to prevent engaging in behavior similar to the fraud that occurred. However, the proposed remedies and civil judgment are pending approval by a judge.

Terraform Labs Filed for Chapter 11 Bankruptcy

Recall that the disgraced crypto entrepreneur Do Kwon and his firm were held responsible for the now defunct stablecoin TerraUSD (UST) collapse, causing turbulence in the crypto market. To everyone’s surprise, the firm filed for bankruptcy protection in the United States, early this year. 

The bankruptcy was filed four days after the U.S. SEC agreed to postpone Do Kwon’s upcoming trial. In February 2023, the two parties were accused of running a multi-billion dollar cryptocurrency fraud involving the UST and Terra (LUNA).

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