Terraform labs, the Singapore-based company behind the Terra blockchain and its associated cryptocurrencies TerraUSD and Luna, is launching a crypto asset loss claim portal on March 31—claims to be submitted by April 30.
On Mar. 28, Terraform labs announced that the Crypto Loss Claims Portal will be open on March 31, with the requirement for creditors to submit their claims and supporting documents via the portal by 11:59 p.m. ET on Apr. 30.
The claim amounts will be calculated based on Eligible Loss Cryptocurrency holdings. Crypto assets with on-chain liquidity under $100, as well as certain other holdings such as Luna 2.0 on Terra 2.0, are not eligible for claims.
Terraform Labs is launching the claims portal as part of its settlement agreement with the U.S. Securities and Exchange Commission, initiating the reimbursement process for creditors who suffered losses after Terra’s collapse. Among the largest unsecured creditors are Alexander Svanevik of Standard Crypto and Ashley Swaren, a commercial lead at TokenTerminal.
In January 2024, Terraform Labs filed for Chapter 11 bankruptcy in the U.S., reporting assets and liabilities between $100 million and $500 million. By September 2024, a U.S. bankruptcy court approved the company’s plan to wind down its operations following a $4.47 billion settlement with the SEC over fraud allegations related to the collapse of TerraUSD (UST) stablecoin.
The SEC alleged that in 2021, Terraform Labs and Do Kwon misled investors about TerraUSD’s ability to maintain its $1 peg. Specifically, after TerraUSD dropped below $1 for the first time in May 2021, Kwon and Terraform secretly arranged for a third party to purchase large amounts of TerraUSD to restore its peg, while publicly misrepresenting the recovery as a result of the algorithm’s effectiveness.
The agency also claimed that Kwon and the company falsely stated that Terraform’s blockchain was integrated into a widely used Korean mobile payment app Chai.
Terra collapse
Terra collapsed in May 2022 after its stablecoin UST lost its peg to the US dollar, resulting in a $40 billion wipeout. UST was an algorithmic stablecoin, meaning it wasn’t backed by reserves like cash or assets. Instead, it relied on a mint-and-burn mechanism with its sister token, LUNA. When UST demand increased, LUNA was burned to mint new UST. Conversely, when UST supply needed to shrink, UST was burned to mint LUNA.
In early May 2022, large withdrawals from Anchor Protocol (a lending platform that offered 20% APY on UST deposits) created sell pressure on UST. UST started to depeg from $1, dropping to $0.98, then lower. Traders panicked and rushed to sell UST, causing even more instability.
To restore UST’s peg, Terraform Labs minted massive amounts of LUNA to absorb the sell-off. But this flooded the market with LUNA, causing its price to plummet from $80+ to fractions of a cent. Even after Terraform Labs deployed $3 billion in Bitcoin (BTC) reserves to restore UST’s peg, it failed.
Co-founder Do Kwon was arrested in Montenegro in March 2023 and was extradited to the U.S. in late 2024, facing fraud and money laundering charges.
