TLDR
- Terraform Labs is selling four of its businesses as part of its bankruptcy proceedings.
- The sale is part of a $4.5 billion settlement with the SEC.
- The four businesses being sold are Pulsar Finance, Station, Enterprise, and Warp.
- Terraform Labs and its co-founder Do Kwon are banned from the crypto industry.
- The collapse of Terra’s ecosystem in May 2022 led to significant losses in the crypto market.
Terraform Labs, the company behind the collapsed Terra cryptocurrency ecosystem, is making moves to sell off four of its businesses.
This decision comes as part of the company’s bankruptcy proceedings and a recent $4.5 billion settlement with the U.S. Securities and Exchange Commission (SEC).
On July 9, 2024, Terraform Labs announced it was “actively exploring options” to sell four of its companies: Pulsar Finance, a portfolio tracking platform; Station, a crypto wallet platform; Enterprise, a no-code decentralized autonomous organization (DAO) management platform; and Warp, a smart contract automation protocol.
The company stated that this sale is an effort to “maximize value for its creditors and other stakeholders” and is part of its “broader wind-down of operations under the terms of its settlement with the US Securities and Exchange Commission.”
Terraform Labs filed for Chapter 11 bankruptcy in Delaware in January 2024, just months after acquiring Pulsar Finance in November 2023.
The company had launched Enterprise a year earlier in November 2022. Despite its financial troubles, Terraform Labs continues to actively develop the Warp protocol and Station wallet, with their last updates in February and March 2024.
The sale of these businesses is directly tied to Terraform Labs’ recent settlement with the SEC. In June 2024, the company and its co-founder, Do Kwon, reached a $4.5 billion settlement with the regulator.
This agreement includes nearly $3.6 billion in disgorgement, a $420 million civil penalty, and about $467 million in prejudgment interest.
As part of the settlement, both Terraform Labs and Do Kwon are essentially banned from the crypto industry. This ends the SEC’s February 2023 lawsuit, which charged them with securities law violations and fraud.
The troubles for Terraform Labs began in May 2022 when its algorithmic stablecoin, TerraUSD (UST), lost its peg to the US dollar. This event triggered a domino effect, causing the price of Terra Luna Classic (LUNC), another cryptocurrency in the Terra ecosystem, to plummet.
The interconnected design of these cryptocurrencies led to what many in the industry called a “death spiral,” resulting in both tokens losing almost all of their value.
The collapse of Terra had far-reaching effects on the crypto market. It wiped out nearly $40 billion from the ecosystem and led to the downfall of several crypto hedge funds that had provided collateral to Terraform Labs.
In April 2024, a jury found Terraform Labs and Do Kwon guilty of defrauding investors in a civil case brought by the SEC. This verdict paved the way for the subsequent settlement.
The current token of Terraform Labs, simply called Terra (LUNA), has not shown significant movement following the news of the business sales. As of July 2024, it is trading at $0.37, down 3% over the week and a staggering 98% from its peak of $18.87 in May 2022.
Terraform Labs faces significant challenges in fulfilling its financial obligations under the SEC settlement. According to testimony from the company’s current CEO, Chris Amani, Terraform Labs has approximately $150 million in assets, far short of the $4.5 billion owed.
