Terraform Labs Warns of Potential Shutdown of Products and Services by October 30

The shutdown of Terraform Labs sets an important standard for how bankruptcies are handled in the crypto industry, and will likely influence future bankruptcy cases.

Key Notes

Terraform Labs plans to shut down key products and services by October 30, 2024, if third-party discussions fail.The reopening of the Shuttle Bridge gives Terra Classic users a final chance to retrieve their wrapped assets before closure.Terraform Labs' bankruptcy process and legal actions could set new standards for handling future bankruptcies in the cryptocurrency sector.

Terraform Labs has announced that several of its products and services may shut down by October 30, 2024. The company is in discussions with third parties to transfer control of these operations, but if no agreements are made, the shutdown will proceed.

The products that could be affected by this move are Enterprise, Warp, Station, and Alliance Hub. In addition, services like Finder Block Explorer, Foundation, IBC Relayers, Mantlemint, FCD, and API services are also at risk. This decision aligns with the company’s planned exit from direct involvement in the Terra ecosystem, a plan that’s been in motion since their bankruptcy filing.

Legal Background and Bankruptcy Proceedings

In September 2024, a US Bankruptcy Judge approved the company’s plan to wind down operations. The judge described the plan as a better alternative than prolonged litigation. Terraform Labs filed for bankruptcy in January 2023 following the collapse of its TerraUSD stablecoin and Luna LUNA $0.39 24h volatility: 1.0% Market cap: $269.78 M Vol. 24h: $37.23 M in May 2022. The event led to around $40 billion in investor losses.

Its founder, Do Kwon, was accused of financial fraud. Terraform Labs reached a $4.5 billion settlement with the US Securities and Exchange Commission (SEC). However, the SEC is unlikely to collect the full amount, as the settlement will be paid after Terraform addresses crypto loss claims from its bankruptcy proceedings.

Shuttle Bridge Opens on a Limited Basis

Terraform Labs also reopened the Shuttle Bridge interface. The bridge enables users to transfer wrapped versions of Luna Classic and TerraUSD Classic between the Terra and other blockchains such as Ethereum ETH $2 622 24h volatility: -0.5% Market cap: $315.64 B Vol. 24h: $15.84 B , BNB Chain BTC $63 733 24h volatility: 0.4% Market cap: $1.26 T Vol. 24h: $25.59 B , and Harmony ONE $0.01 24h volatility: -0.5% Market cap: $174.56 M Vol. 24h: $6.78 M . It will stay open until October 30, 2024, and is the last chance for users to redeem their assets. After its closure, all the remaining assets in the contracts will be burned.

This is important for users of Terra Classic, as it could be their last opportunity to recover wrapped assets before the service turns off. Reopening Shuttle Bridge is also part of a larger effort by Terraform Labs to transition from direct involvement in the Terra ecosystem.

Final Chain Upgrade

In another development, Terraform Labs announced Proposal 4818, which will be its final blockchain upgrade. Once it stops working, the company will not support future upgrades or maintenance. Instead, the Terra community will take over through initiatives such as the Phoenix Directive. This represents a shift away from Terraform-led development to a community-driven effort for maintaining and evolving the blockchain infrastructure.

The shutdown of Terraform Labs sets an important standard for how bankruptcies are handled in the crypto industry, and will likely influence future bankruptcy cases.

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