Terraform Labs CEO Chris Amani announced that Terra will transition to a community project as the company winds down following a $4.5 billion SEC settlement.

In a June 12 statement, Amani said the community must "take over ownership of the chain," and noted that certain teams and developers are interested in managing the project and will announce their plans on the forums.

Amani mentioned that Terraform Labs always planned to dissolve and can now proceed with that plan. He noted that while the company was "well positioned to accelerate" if it had won the SEC case, it can no longer operate due to losing the trial.

During the wind-down period, Terraform Labs will continue to operate its products. The company plans to sell Pulsar Finance, a cross-chain portfolio manager acquired in late 2023, as well as Station Protocol and Enterprise Protocol. Additionally, Amani announced that TFL will propose burning all of its unvested Luna and any vested crypto in its wallets.

Coinbase CLO Criticizes Settlement

The settlement has sparked reactions in the industry. Coinbase CEO Paul Grewal criticized the outcome, highlighting its benefits for the SEC. Grewal said the settlement "just makes the SEC an unsecured creditor," meaning the agency will receive funds through Terraform Labs’ bankruptcy case. He also noted that the firm orders Terra’s co-founder and former CEO Do Kwon to "hand over $7 million of assets."

Grewal remarked:

“It’s predictably on-brand … There’s zero meaningful relief to fraud victims. This is no way to regulate.”

Messari CEO Ryan Selkis also criticized the settlement amount, arguing it should go to a victims' restitution fund rather than the SEC. He added that any other outcome should result in SEC Chair Gary Gensler facing life imprisonment.

The SEC’s unsecured creditor claim concerns the majority of the settlement amount, but harmed investors will receive certain assets that Kwon transfers to the Liquidating Trust.