Terraform Labs, the company behind TerraUSD (UST) and Luna, has secured court approval to wind down operations in bankruptcy after settling with the United States Securities and Exchange Commission (SEC).

According to a Reuters report, the wind-down plan was approved by US Bankruptcy Judge Brendan Shannon, who called it a welcome alternative to further litigation over investors losses. The approval marks the final step in Terraforms bankruptcy proceedings.

Terraform Legal Woes

The development comes three months after Terraform and co-founder Do Kwon reached a $4.47 billion agreement with the SEC to settle fraud charges related to the collapse of the Terra ecosystem.

The agency accused Terraform and the co-founder of deceiving investors about the stability of TerraUSD, an algorithmic stablecoin that collapsed in May 2022 after failing to maintain its $1 parity.

After depegging from the US dollar, TerraUSD sister token Luna crashed, wiping out $40 billion in market value, causing devastating losses to investors, and leading to a wave of bankruptcy for multiple industry firms.

As part of that settlement with SEC, Terraform agreed to pay $3.58 billion in disgorgement and $469 million in prejudgment interest, while Kwon agreed to pay $110 million in disgorgement and $14.32 million in prejudgment interest on a joint basis with the company.

The SEC Might Get Nothing

The settlement amount has been agreed to be paid only after Terraform has settled harmed investors and other general unsecured creditors as part of its bankruptcy wind-down. Thus, the SEC might end up with little or nothing.

According to Terraform, the value of crypto losses that will be eligible to be paid during the companys liquidation is currently impossible to estimate. However, it calculated it could pay between $184.5 million and $442.2 million to crypto purchasers and other stakeholders as part of its bankruptcy liquidation.

In its bankruptcy filing in January, Terraform estimated assets and liabilities ranging from $100 million to $500 million and creditors between 100 and 199.