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As Terraform Labs Only Holds $75 Million in Assets, How Will it Cover the $4.75 Billion SEC Payment?
Exciting news broke on Wednesday as Terraform Labs announced a whopping $4.5 billion settlement with the SEC. The crypto community is buzzing with questions about how a seemingly bankrupt company with only $75 million in assets plans to cover such a huge fine!
Unpacking Terraform Labs’ $4.5 Billion Payment
Ki Young Ju, the founder of CryptoQuant, raised eyebrows over the origin of this massive settlement sum, equating to 64,824 Bitcoin. Speculation is rife about whether this money truly went towards stabilizing the UST peg, casting doubts on the entire transaction.
“Where did this money suddenly come from? Was it genuinely used to resolve the peg issue?” pondered Ki Young Ju on X platform. He further questioned the feasibility of Terraform Labs shelling out $4.47 billion, even with a market cap of $40 billion. Expressing skepticism, he suggested that neither Do Kwon nor Terraform Labs would have access to such substantial funds. These concerns were echoed by Coinbase CLO Paul Grewal, as reported by CoinGape.
With Terraform Labs allegedly holding only $75 million in known assets, the burning question remains: How will they foot the remaining $3.75 billion bill?
Curious case of #Terraform: They claim to have $75m in assets, but where is the remaining $3.75b for the #SEC fine coming from? 👀 pic.twitter.com/vqcbeGMgte
— MartyParty (@martypartymusic) June 12, 2024
The co-founder of Bankless and Ethereum contributor, David Hoffman, chimed in, stating: “If Terraform Labs ACTUALLY has $4.5B in assets… and if it ACTUALLY is paid as a fine to the U.S. SEC, instead of the users who lost it…. it’ll be one of the craziest examples of agency corruption in our lifetimes”.
Decoding the $4.5 Billion SEC Settlement
It’s crucial to note that Terraform Labs’ settlement involves disgorgement to the bankrupt estate, not a direct payment to the SEC. The judgment encompasses $4.05 billion in disgorgement, alongside interest and a $420 million civil penalty.
Given Terra’s Chapter 11 bankruptcy filing in January, the likelihood of them paying a significant portion of the settlement is slim. Instead, it will be classified as an unsecured claim in the liquidation process.
Terra founder Do Kwon has consented to a crypto transaction ban and will transfer $204 million to Terraform’s bankruptcy estate.
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