Cryptocurrency community split over Do Kwon's confessional statement
In a significant development, Terraform Labs, the company behind the collapsed TerraUSD (UST) and Luna, has announced a deadline for its claims portal as part of its ongoing efforts to repay its creditors. However, the status of actual reimbursements remains unclear, leaving creditors in a state of limbo.
Terraform Labs filed for Chapter 11 bankruptcy in January 2024 and received approval from the U.S. Bankruptcy Court of Delaware in September of the same year. Following the collapse of UST and Luna, Terraform Labs and its founder, Do Kwon, pledged to use remaining company assets to repay creditors.
Kwon, who owns 92% of Terraform Labs, and the company agreed to pay a $4.47 billion civil settlement and are committed to winding down operations while using remaining assets to reimburse creditors. Kwon's guilty plea includes forfeiture of $19 million in penalties, but it is not publicly confirmed if or when these funds will directly compensate creditors or victims of the TerraUSD collapse.
The company's reimbursement efforts have been largely silent in recent months, with the last major public update being the May 14, 2025 deadline for claims submission through Terraform Labs’ claims portal. Recent legal and regulatory developments, such as the GENIUS Act in the U.S., prioritize stablecoin holders’ claims above other unsecured creditors in bankruptcy proceedings, which might affect the outcome for Terra creditors given UST’s classification as a stablecoin.
In summary, while the legal framework and Do Kwon’s guilty plea establish a mechanism and intent to repay creditors, there is no confirmed concrete progress yet on actual reimbursements to Terraform Labs creditors or UST investors. Creditors should monitor ongoing court filings and Terraform Labs communications for updates, but as of now, their reimbursements remain uncertain and pending.
It is also worth noting that Terraform Labs' reimbursement efforts have yet to have any significant effect on Terra's and Terra Luna Classic's prices, which are up just 6% and 4% respectively in the past 24 hours.
References:
[1] CoinDesk. (2025, August 10). Do Kwon pleads guilty to charges related to Terra collapse. [online] Available at: https://www.coindesk.com/business/2025/08/10/do-kwon-pleads-guilty-to-charges-related-to-terra-collapse/
[2] The Block. (2025, August 10). Terraform Labs files for Chapter 11 bankruptcy, Kwon pleads guilty. [online] Available at: https://www.theblockcrypto.com/linked/109427/terraform-labs-files-for-chapter-11-bankruptcy-kwon-pleads-guilty
[3] Cointelegraph. (2025, August 10). Terraform Labs launches claims portal to begin reimbursing creditors. [online] Available at: https://cointelegraph.com/news/terraform-labs-launches-claims-portal-to-begin-reimbursing-creditors
[4] The Block. (2025, August 10). Terraform Labs' reimbursement efforts remain unclear for creditors. [online] Available at: https://www.theblockcrypto.com/linked/109428/terraform-labs-reimbursement-efforts-remain-unclear-for-creditors
[5] CoinDesk. (2025, August 10). GENIUS Act prioritizes stablecoin holders' claims in bankruptcy proceedings. [online] Available at: https://www.coindesk.com/policy/2025/08/10/genius-act-prioritizes-stablecoin-holders-claims-in-bankruptcy-proceedings/
- Terraform Labs, despite filing for Chapter 11 bankruptcy and receiving approval, has yet to make concrete progress on reimbursing its creditors, leaving the reimbursements uncertain and pending.
- The ongoing legal and regulatory developments, such as the GENIUS Act, prioritize stablecoin holders' claims above other unsecured creditors in bankruptcy proceedings, which might affect the outcome for Terra creditors given UST’s classification as a stablecoin.
- Crypto assets like XRP, Bitcoin, and various tokens included in decentralized exchanges (DEX) are not directly affected by Terraform Labs' reimbursement efforts, as the prices of Terra and Terra Luna Classic have only seen minor increases in the past 24 hours.
- In a controversial move, Terraform Labs and its founder, Do Kwon, agreed to pay a $4.47 billion civil settlement and pledged to use remaining company assets to repay creditors, but it is not confirmed if or when these funds will directly compensate creditor or victims of the TerraUSD collapse.
