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In mid-2022, the cryptocurrency markets experienced a significant crash, leading to the collapse of the Terra ecosystem, which had a market capitalization exceeding $40 billion. This major downturn halted the momentum of algorithmic stablecoins and those backed by cryptocurrencies, triggering the bankruptcies of 3AC and others, as well as the FTX incident.
Terra’s Recent Developments
Terraform Labs PTE and Terraform Labs Limited announced a revised Chapter 11 liquidation plan, officially entering the liquidation process. The recently shared document includes details about the types of creditors involved and the specifics of the liquidation process. This process will be managed through a fund named Wind Down Trust, which has ten different groups of creditors.
- Tax debts owed to the government
- Secured company debts
- Payments to creditors related to the Singapore lawsuit
- Debts owed to banks and service providers
- Losses incurred by users in the Terra ecosystem
Following the payment of these debts, the SEC‘s claim exceeding $4 billion will be addressed, along with inter-company receivables, intra-group shares, and debts deemed lower priority by the court. The SEC alone imposed a fine of $4.47 billion. However, collection is impossible as Terra lacks cash. The minimal remaining cash is earmarked for litigation expenses, making this liquidation plan largely a formality. The companies will be fully closed, and a separate announcement will be made regarding the application dates for creditors.
Although LUNA’s price has seen a 2% increase, it now lacks the backing of an official company, thus facing a fate similar to FTT in the long term.
