Terraform Labs, based in Singapore and known for the Terra blockchain and its related cryptocurrencies, TerraUSD and Luna, is set to launch a crypto asset loss claim portal on March 31, with claims due by April 30.
On March 28, the company revealed that the Crypto Loss Claims Portal will open on March 31, with creditors required to submit their claims and supporting documentation by 11:59 p.m. ET on April 30.
The amount claimed will depend on the Eligible Loss Cryptocurrency holdings. Notably, crypto assets with on-chain liquidity below $100, as well as certain holdings like Luna 2.0 on Terra 2.0, will not qualify for claims.
The launch of this claims portal is part of a settlement with the U.S. Securities and Exchange Commission, aimed at beginning the reimbursement process for creditors who experienced losses following the downfall of Terra. Among the notable unsecured creditors are Alexander Svanevik from Standard Crypto and Ashley Swaren, a commercial lead at TokenTerminal.
In January 2024, Terraform Labs filed for Chapter 11 bankruptcy in the United States, declaring assets and liabilities ranging from $100 million to $500 million. By September 2024, the company’s plan to cease operations was approved by a U.S. bankruptcy court, following a $4.47 billion settlement with the SEC over fraud allegations concerning the collapse of the TerraUSD (UST) stablecoin.
The SEC claimed that in 2021, Terraform Labs and co-founder Do Kwon misled investors concerning TerraUSD’s ability to maintain its $1 peg. Specifically, after TerraUSD initially fell below $1 in May 2021, Kwon and Terraform arranged for a third party to buy significant amounts of TerraUSD to restore its peg, misleadingly presenting the recovery as a success of the algorithm.
Additionally, the agency asserted that Kwon and the firm falsely claimed that Terraform’s blockchain was integrated with a popular Korean mobile payment application called Chai.
### The Collapse of Terra
The Terra network collapsed in May 2022 when its stablecoin UST lost its peg to the US dollar, resulting in a staggering $40 billion loss. UST was an algorithmic stablecoin, not backed by reserves but rather relying on a mint-and-burn mechanism involving its counterpart token, LUNA. As demand for UST rose, LUNA would be burned to mint new UST, and vice versa when supply needed to decrease.
In early May 2022, a wave of withdrawals from Anchor Protocol, which offered a 20% return on UST deposits, caused sell pressure on UST. The stablecoin began to depeg, falling to $0.98 and continuing to drop, prompting widespread panic selling among traders.
In an attempt to restore UST’s peg, Terraform Labs minted vast quantities of LUNA to absorb the sell-off, which ultimately flooded the market and caused LUNA’s price to crash from over $80 to mere cents. Despite deploying $3 billion in Bitcoin reserves to stabilize UST’s peg, their efforts proved futile.
Co-founder Do Kwon was arrested in Montenegro in March 2023 and was subsequently extradited to the U.S. in late 2024 to face charges of fraud and money laundering.