The liquidators of the collapsed crypto hedge fund Three Arrows Capital (3AC) are demanding at least $1.3 billion from Terraform Labs. This claim aims to recover losses incurred by 3AC following the crash of Luna and TerraUSD in 2022.
According to a Bloomberg report, the liquidators have initiated a lawsuit seeking damages of $1.3 billion. This legal action is part of 3AC’s ongoing efforts to recover funds for its creditors after the fund’s liquidation.
The lawsuit alleges that Terraform Labs misled 3AC into purchasing Luna and TerraUSD tokens by artificially inflating their prices. The devastating crash of these assets in 2022 led to substantial losses for 3AC across its investment portfolio.
Court documents reveal that 3AC held approximately $462 million in Luna as of late April 2022. By mid-May 2022, the value of these holdings had dropped dramatically to just $2,700 following a significant sell-off. Additionally, the net value of other digital assets held by 3AC fell by $858 million during the same period.
Claims and Legal Proceedings
A court in the British Virgin Islands appointed the consulting firm Teneo as the liquidator for 3AC after the hedge fund filed for bankruptcy. Teneo has estimated that 3AC owes its creditors around $3.3 billion.
In December 2023, the court froze approximately $1.14 billion in assets belonging to 3AC’s co-founders, Su Zhu and Kyle Davies, prohibiting them from transferring or selling these assets.
The outcome of the compensation claim against Terraform Labs remains uncertain.
In June, Terraform Labs, founded by Do Kwon, announced its decision to cease operations following a settlement with the SEC. Do Kwon, who was arrested in Montenegro last year, faces legal challenges in both the United States and South Korea. Recently, a Montenegrin court ruled in favor of extraditing Kwon to South Korea.
The Terra ecosystem collapse also impacted various other crypto entities, including lenders such as Celsius, Vauld, and Voyager, as well as exchanges like FTX.
