Terraform Labs — the company behind LUNA and the algorithmic stablecoin TerraUSD (UST) — is set to launch a crypto loss claims portal on March 31, aiming to reimburse individuals who lost at least $100 due to the collapse of the Terra ecosystem in 2022.
This initiative comes in the wake of a Delaware court’s recent approval for Terraform Labs to wind down operations. The judge overseeing the case concurred with Terraform Labs’ bankruptcy plan, labeling it a “welcome alternative” to ongoing litigation concerning investor losses.
In a notable development, Terraform Labs settled with the U.S. Securities and Exchange Commission (SEC) in June 2024 for $4.47 billion, further complicating its financial obligations to affected stakeholders.
To qualify for reimbursement, claimants must submit their claims, accompanied by relevant documentation, through the portal by 11:59 PM ET on April 30. However, claims under $100 will not be accepted.
Claimants can provide two types of evidence: manual and preferred. Manual evidence includes transaction logs, account statements, and screenshots, whereas preferred evidence refers to read-only API keys, which are deemed more accurate and reliable — particularly for users of major exchanges. Terraform Labs has cautioned that claims submitted with manual evidence may be subjected to a prolonged review process and could be disallowed if preferred evidence is also available. The company estimates that it could distribute between $184.5 million to $442.2 million to investors and stakeholders, though determining the exact total of eligible crypto losses presents challenges.
Terraform Labs’ Fall from Grace
In June 2024, Terraform Labs announced its decision to cease operations and transfer control of the Terra blockchain to the community. The entity outlined its plans to sell key projects within the Terra ecosystem and to burn unvested and vested holdings.
The collapse of Terraform Labs was preceded by a $45 billion ecosystem reliant on its algorithmic stablecoin and the LUNA token. Founder Do Kwon was subsequently arrested in Montenegro and extradited to the United States, facing charges from the U.S. Justice Department, including eight felonies.
The unprecedented disintegration of the Terra ecosystem reverberated throughout the cryptocurrency community, resulting in Bitcoin experiencing a 37% devaluation over a 30-day period, plummeting to $19,000.
Kwon’s U.S. court hearing has recently been postponed until April 10 as prosecutors are reviewing a substantial amount of new evidence. This ongoing saga raises critical questions about the stability and regulatory oversight of cryptocurrency ventures.
Related: Terraform Labs and Do Kwon Found Liable for Fraud in SEC Case
