Terraform Labs Launches Claims Portal to Begin Reimbursing Creditors

Terraform Labs, the company behind the Terra blockchain and its associated cryptocurrencies TerraUSD (UST) and Luna, is officially launching the Crypto Asset Loss Claims Portal on March 31, 2025, to initiate the process of reimbursing creditors who suffered losses following the collapse of the Terra ecosystem in May 2022. The portal will be open for claims from March 31 to April 30, 2025, with a deadline for submitting claims and supporting documentation by 11:59 PM ET on April 30, 2025.

Creditors are required to submit claims based on their eligible loss cryptocurrency holdings. However, assets with on-chain liquidity valued under $100, as well as certain holdings such as Luna 2.0 on Terra 2.0, are not eligible for claims. This initiative is part of Terraform Labs’ settlement agreement with the U.S. Securities and Exchange Commission (SEC), which requires the company to compensate affected investors after the catastrophic collapse of the Terra ecosystem.

The Terra collapse, which happened in May 2022, wiped out $40 billion in value, primarily due to the failure of TerraUSD (UST), an algorithmic stablecoin that lost its peg to the U.S. dollar. To maintain the peg, Terraform Labs minted vast amounts of Luna, its sister token, flooding the market and causing Luna’s value to plummet from over $80 to mere fractions of a cent. Despite efforts to stabilize UST using $3 billion in Bitcoin reserves, the system failed, triggering a market-wide panic and massive sell-offs.

The U.S. SEC has accused Terraform Labs and its co-founder Do Kwon of misleading investors about UST’s ability to maintain its dollar peg. Specifically, after the stablecoin’s value dropped below $1 in May 2021, Terraform Labs and Kwon allegedly arranged for a third party to purchase large amounts of UST in a bid to restore its peg, while publicly misrepresenting the situation as proof of the algorithm’s success. Furthermore, the SEC claimed that Terraform Labs falsely asserted its blockchain integration with the widely used Korean mobile payment app Chai, deceiving investors and users about the platform’s real-world adoption.

In January 2024, Terraform Labs filed for Chapter 11 bankruptcy in the U.S., revealing total assets and liabilities between $100 million and $500 million. The company’s efforts to resolve the legal and financial issues culminated in a $4.47 billion settlement with the SEC, which allowed the company to proceed with winding down its operations.

As part of its legal proceedings, Terraform Labs has been working on reimbursing creditors who suffered significant losses. The Crypto Asset Loss Claims Portal is the first step in facilitating these reimbursements, enabling investors to submit their claims and supporting documents in a streamlined and transparent process.

Do Kwon, the co-founder of Terraform Labs, was arrested in March 2023 in Montenegro and subsequently extradited to the U.S. in late 2024. He now faces serious charges, including fraud and money laundering related to the collapse of the Terra ecosystem. This legal action against Kwon and Terraform Labs has garnered widespread attention, highlighting the risks of algorithmic stablecoins and the importance of regulatory oversight in the crypto space.

Creditors are encouraged to submit their claims as soon as possible to ensure they are considered for reimbursement. Terraform Labs has made it clear that only eligible assets will be accepted for claims, and failure to meet the requirements will result in ineligibility for the reimbursement process. This marks a significant step in the ongoing efforts to resolve the financial aftermath of the Terra collapse and provide some form of restitution for the affected parties.