Following the bankruptcy filing, Terraform has received court approval to wind down its operations as part of a bankruptcy plan.

On September 19, 2024, U.S. Bankruptcy Judge Brendan Shannon approved this winding down plan, describing it as a 'welcome alternative' to prolonged litigation over investor losses.

The judge's approval comes after Terraform and its founder, Do Kwon, were found liable for defrauding investors, leading to a settlement with the SEC for approximately $4.5 billion.

Terraform Labs filed for Chapter 11 bankruptcy in January 2024, citing estimated liabilities and assets between $100 and $500 million.

This settlement was reached after a jury's finding of liability in April 2024, which also required Kwon to be personally liable for $110 million of the settlement.

The SEC's allegations against Terraform included claims that the company misled investors about the stability of its algorithmic stablecoin, TerraUSD, resulting in an estimated $40 billion loss during the collapse of the Terra ecosystem in 2022.

As Terraform prepares for its wind-down, it has been transferring assets, including nearly $63 million worth of Bitcoin, to a new address.

It remains unclear whether Terraform's investors will receive any compensation from the bankruptcy proceedings, despite estimates that the company could pay between $184.5 million and $442.2 million to stakeholders.

The SEC will not collect any funds from the settlement until Terraform addresses all losses claimed during its liquidation process.

Do Kwon, who is currently in Montenegro awaiting extradition to the U.S. or South Korea on fraud charges, was previously arrested for using fake documents.

Kwon's actions and the instability of Terraform's blockchain were significant factors contributing to the company's collapse.