Terraform Labs’ Chapter 11 Case: Key Developments and Implications for LUNA

Terraform Labs (TFL), the company behind the troubled Terra blockchain, has received court approval to reopen its Shuttle Bridge as part of its ongoing bankruptcy proceedings. This move allows users to redeem certain assets and marks a significant step in TFL’s restructuring efforts.

Under the court order, TFL will reopen the Shuttle Bridge, enabling users to redeem wrapped assets on Terra Classic. Assets currently held in Shuttle Bridge wallets will be transferred to new, more secure wallets, which will streamline the redemption process. Users will have 30 days after TFL’s Chapter 11 plan becomes effective to redeem their assets.

The plan’s approval and implementation are expected no earlier than late September 2024. After this period, TFL intends to permanently shut down the Shuttle Bridge, with any remaining assets to be burned.

The court order also mandates that TFL begin the revoking process for 125 million LUNA tokens currently staked with 49 validators. This move aligns with a settlement agreement reached between TFL and the U.S. Securities and Exchange Commission (SEC). Once the un-delegation process is complete, both the 125 million LUNA used for staking and an additional 25 million LUNA allocated for liquidity provisioning will be permanently burned.

The 49 validators involved in this process were carefully selected based on specific recommendations from the Terra Delegation Committee. This strategic action marks a notable shift in the handling and management of LUNA tokens as TFL navigates its Chapter 11 proceedings.

Terra reported that it will provide further instructions through its official channels, including the Terra Money Twitter accounts, in due time. The company noted that previous users of the Shuttle Bridge will be informed of the necessary steps to redeem their assets once the new Shuttle Bridge interface is operational.