Terraform Labs has opened an online portal for investors to submit compensation claims for financial losses stemming from the May 2022 de-pegging of TerraUSD.
Managed by administrators at New York-based Kroll, the portal will open on Monday, March 31 and close on April 30, giving loss-making investors a month to file claims.
Applicants will have to submit evidence supporting their filings, including wallet addresses in which Terra-based cryptocurrencies were held, as well as transaction logs for any users who sold tokens at a loss after the May de-peg.
Kroll will then arrive at “Initial Determination” for each applicant that provides a “Crypto Loss Amount,” with the administrator then distributing compensation on a pro rata basis, dependent on the overall amount available for compensation and the overall number of claimants.
As the administrators acknowledged in an order submitted to the U.S. Bankruptcy Court for the District of Delaware, “your pro rata share of amounts that are approved for distributions to holders of Allowed Crypto Loss Claims by the Plan Administrator may be materially less than your Crypto Loss Amount.”
Last September, Terra revealed that it would be able to disburse between $184.5 million and $442.2 million to creditors, yet it admitted that the total value of eligible losses may be “impossible to estimate.”
Given that TerraUSD and Luna were worth more than $45 billion prior to the May 2022 collapse, many creditors could end up receiving distinctly less than what they had lost.
Kroll states that they will send a notification to creditors within 90 days of the closing date for applications, with claimants having the opportunity to dispute the administrator’s determination of their loss amounts.
It seems that reimbursements will be paid out in dollars, since Kroll’s submitted order advises that “distributions to claimants may be impossible” in the event of “an inability of any claimant to receive distributions in U.S. dollars.”
Terraform Labs filed for Chapter 11 bankruptcy protection in January of last year, reporting that it had assets and liabilities of between $100 million and $500 million.
In July 2024, it agreed to pay a fine of $4.5 billion to settle fraud charges with the SEC, while founder Do Kwon’s fraud trial is set to begin on January 26, 2026 in the U.S. District Court for the Southern District of New York.
The latter is scheduled to last between one and two months, and will mark the end of what was a dramatic fall for a company that once boasted two top-10 cryptocurrencies.
At the least, Terraform Lab’s payment of compensation to creditors may underline how the cryptocurrency industry is gradually being brought in line with the rest of the financial services industry and the regulations that have governed it for years.
“While this may be a positive signal restoring trust in the community, this is absolutely a normal process in a financial market and services; we have seen these protections exist in TradFi,” says Hedi Navazan, the chief compliance officer at 1inch Labs, speaking to Decrypt.
Navazan adds that it’s “good that the crypto sector is also learning” from the standards and practices that already exist in the traditional financial market, while adding that the claim portal and compensation plan is something that emerged from the settlement Terraform Labs reached with the SEC in September.
She explains, “In fact, if it were not for the SEC requirements and the regulation which was already in place for protecting consumers, today we would not have seen the launch of the claim portal.”
Edited by James Rubin.
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