Terraform Labs Has Just $75 Million In Assets, How Will It Pay the SEC $4.75 Billion?

In a major announcement on Wednesday, Terraform Labs stated that they would be paying nearly $4.5 billion in order to settle the SEC lawsuit. However, many in the crypto community have started raising doubts about how the bankrupt Terraform Labs with only $75 million in assets under management plan to pay such a massive amount in fines.

From Where Will Terraform Labs Bring $4.5 Billion?

CryptoQuant founder Ki Young Ju recently questioned the source of such a large sum of settlement by Terraform Labs which is equivalent to 64,824 Bitcoin. He questioned whether this sum was actually used to restore the UST peg while expressing suspicion over the transaction.

“Where does this money come from? Did they actually use it to restore the peg? Sus,” Ki Young Ju stated on X platform. He further stated that the $4.47 billion cash-out is implausible, even if Terraform’s market cap is $40 billion while adding that neither Do Kwon nor Terraform Labs should possess such a substantial amount of funds. As reported by CoinGape, Coinbase CLO Paul Grewal also raised doubts over the SEC settlement.

On the other hand, Terraform Labs has only $75 million worth of assets in their “known” wallet. So the question remains where will it bring the additional $3.75 billion?

So #Terraform only have $75m in assets in their “known” wallets – where is the $3.75b balance of this #SEC fine coming from? 👀 pic.twitter.com/vqcbeGMgte

— MartyParty (@martypartymusic) June 12, 2024

David Hoffman, the co-founder of Bankless and Ethereum contributor stated: “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”.

What’s the Truth Behind the $4.5 Billion SEC Settlement?

Note that the current settlement with Terraform Labs involves disgorgement to the bankrupt estate instead of any direct payment to the SEC. The judgment includes $4.05 billion in disgorgement in addition to interest and a $420 million civil fine.

Considering Terra’s bankruptcy filing in January, they are unlikely to pay much of the total settlement amount. Rather, it will be treated as an unsecured claim in the Chapter 11 liquidation process.

Terra founder Do Kwon has also agreed to a ban on crypto transactions and shall transfer $204 million to Terraform’s bankruptcy estate.