Terraform Labs has initiated a claims portal for compensation requests from investors affected by the TerraUSD collapse, providing an avenue for recovery.
Eligibility Criteria & Filing Process
According to the company's blog post, creditors must register on the Kroll-managed portal and provide proof of ownership to submit their requests. Those with holdings on the Terra platform or supported networks must sign a transaction at no cost. Creditors with assets on other platforms can submit a read-only API key or manual evidence like transaction logs, which may result in extended review periods. The plan administrator will assess claims based on eligible crypto holdings losses. Not all assets qualify for compensation—cryptocurrencies with on-chain liquidity below $100 and specific holdings like Luna 2.0 on Terra 2.0 are excluded. Claims submitted with manual evidence may be rejected if preferred verification methods are available but not employed.
UST Collapse and Legal Troubles
Terraform Labs’ stablecoin, UST, collapsed in May 2022 when its algorithmic peg to the U.S. dollar failed, leading to an estimated $40 billion in market losses. This incident led to several lawsuits and investigations, culminating in the company's bankruptcy filing in January 2024. By September, a court approved the company’s plan to wind down operations as part of its bankruptcy proceedings. Additionally, the company reached a settlement with the U.S. Securities and Exchange Commission (SEC) to pay $4.47 billion in disgorgement and penalties.
Settlements and Distributions to Creditors
Terraform Labs will use assets held by Do Kwon, including PYTH tokens, to meet its payment obligations. However, payments to the SEC will be made only after addressing creditor claims through the company's liquidation process. All claims submitted will be reviewed by the Wind Down Trust, and within 90 days of the April 30 deadline, creditors will receive a portal notification about their submission status. They can accept or dispute the findings, with approved amounts distributed on a pro-rata basis shortly thereafter.
The opening of the claims portal offers affected investors a chance to recoup some of their losses. Terraform Labs continues to meet its obligations, including settling SEC demands, while ensuring that creditor claims take precedence during the liquidation process.
