Terraform Labs received court approval to wind down its operations in bankruptcy after settling a US Securities and Exchange Commission (SEC) lawsuit, Reuters reported Sept. 19.

US Bankruptcy Judge Brendan Shannon approved Terraform’s bankruptcy plan in Wilmington, Delaware, calling it a “welcome alternative” to further litigation over investor losses. The court approval represents the final step in Terraform’s bankruptcy proceedings, which began in January.

Following a jury’s finding of liability for investor fraud in April, Terraform agreed to settle the case with the SEC by paying a $4.47 billion fine. Investigations estimate that the company defrauded investors by $40 billion when the Terra ecosystem collapsed in 2022.

Terraform co-founder Do Kwon was also held liable to pay $110 million of the amount agreed on the settlement, along with $14.3 million from prejudgment interest amounts.

Additionally, he must transfer various assets, including ownership interests in PYTH tokens and other holdings, to the Terraform bankruptcy estate. These assets will be used to satisfy the monetary penalties and distributed to harmed investors through a liquidating trust.

Notably, the settlement amount will be paid to the regulator only after Terraform covers all losses claimed during its liquidation process. Thus, the SEC may end up without collecting the money.

The company said it could pay between $184.5 million and $442.2 million to crypto purchasers and other stakeholders in its bankruptcy liquidation. According to Terraform, the total value of eligible crypto losses remains “impossible to estimate.”

Terraform has been conducting preparations for its wind-down since early September when it moved nearly $63 million worth of Bitcoin (BTC) to a new address.

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