Stout was retained by the Unsecured Creditors Committee (UCC) in the federal bankruptcy proceedings of Terraform Labs, working alongside legal counsel at McDermott Will & Emery and the UCC’s financial advisors to conduct an independent digital asset forensic investigation and blockchain tracing analysis. The engagement involved a comprehensive review of on-chain activity across multiple blockchain networks, centralized exchange flows, cross-chain bridges, staking accounts, governance mechanisms, and transaction metadata. Our work focused on identifying, attributing, and reconstructing digital asset transfers across more than 300 crypto wallets, including the analysis of wallet governance structures, signer privileges, program-derived addresses (PDAs), staking account ownership, and token withdrawal mechanics on networks such as Terra and Solana.

We analyzed large-scale token conversions, including stablecoin-to-Bitcoin transfers, evaluated the use of privacy-enhancing infrastructure such as Threshold and cross-chain protocols (e.g., Wormhole), and assessed whether transaction pathways reflected economic efficiency or obfuscation intent. We reconciled transaction flows using forensic modeling and independent wallet-to-wallet tracing, validating and challenging reconciliation analyses prepared by third parties. In addition, we conducted a detailed review of governance code (including Rust-based protocol logic), staking authorization structures, signer delegation mechanisms, and manual versus automated execution pathways to determine control, authorization, and attribution of high-value token withdrawals. This included tracing governance token movements through staking accounts, intermediary wallets, and ultimately to centralized exchange accounts.

Through advanced blockchain analytics, wallet clustering, transaction graph modeling, and metadata interpretation, we identified and linked over $150 million in previously undisclosed digital assets concealed across multiple wallets and networks. Our findings were instrumental in informing recovery strategies, supporting court filings, and enhancing potential creditor recoveries in one of the most significant digital asset insolvency cases to date. Perhaps the most significant outcomes of our work were the influence and impact over the ongoing SEC actions related to this bankruptcy. Our client, the regulator and the bankruptcy judge were all impressed by our results.

The engagement required expertise in digital asset valuation, blockchain protocol mechanics, forensic accounting, governance architecture analysis, and federal bankruptcy litigation support.