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Terraform Labs launches creditor compensation process

Published: 28 Apr. 2025, 20:02

Smartphone with Terra logo is placed on displayed U.S. dollars in this illustration taken on May 11, 2022. [REUTERS/YONHAP]

Three years after the Terra-Luna crash dealt a devastating blow to the cryptocurrency market, leaving an estimated 65 trillion won ($45 billion) in investor losses and becoming one of the worst collapses in blockchain history, Terraform Labs has officially launched its creditor compensation process under the supervision of the U.S. Bankruptcy Court for the District of Delaware.

Kroll Restructuring, the court-appointed claims agent, announced that it will accept claim submissions through an online portal until May 16. It warned that claims filed after the deadline may not be recognized. The compensation fund prepared by Terraform Labs is estimated to be at least $184.5 million.

Victims seeking compensation must access the online portal to fill out an application and complete steps such as email verification and Google one-time password setup. During the claims process, applicants are advised to submit "Preferred Evidence" such as API keys from cryptocurrency exchanges or wallet integrations, as these methods are said to enhance the reliability and speed of verification.

However, for Korean exchanges, some platforms require a fixed IP address registration when connecting APIs, or they restrict external access altogether. As a result, applicants must configure these settings in advance for a proper submission. This technical complexity is causing concerns among general investors, many of whom may find the process burdensome.

The seal of the U.S. Securities and Exchange Commission (SEC) is seen at its headquarters in Washington, D.C., on May 12, 2021. [REUTERS/YONHAP]

Montenegrin police officers escort Terraform Labs founder Do Kwon in Montenegro's capital Podgorica on March 23, 2024. [AP/YONHAP]

"While the claims system is technically open to everyone, in reality, participating in the process requires a considerable degree of information access and technical understanding," said Jin Hyeon-su, managing attorney at Decent Lawfirm. "Korean investors, in particular, may find it difficult to complete the claims independently."

"Since the Terra case requires mandatory online filing by the deadline, and errors in application or omissions in document submission can result in claim denial, an increasing number of investors are now opting to have experts review their claims to ensure safe submission," added Jin.

The scope of eligible claims is also limited. Terra 2.0 Luna, or Luna 2, assets are excluded from compensation, and assets with on-chain liquidity of less than $100 are not eligible either. Even if an applicant does not currently hold the assets, claims are possible if past holdings and losses at specific time points can be verified. However, supporting materials must be systematically organized and submitted according to prescribed formats.

Decent Law Firm is currently assisting Korean Terra and Luna investors with the bankruptcy claim process. The firm offers services such as API issuance support, manual evidence preparation, and presubmission reviews of claims. Applications for assistance can be made through Decent Law Firm’s official website.

Translated from the JoongAng Ilbo using generative AI and edited by Korea JoongAng Daily staff.
BY PARK SI-HYUN [[email protected]]