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Liquidators of the now-defunct cryptocurrency hedge fund Three Arrows Capital (3AC), which collapsed due to the downfall of Luna and TerraUSD, are pursuing at least $1.3 billion in restitution from Terraform Labs. This claim aims to mitigate the losses that the fund experienced following the events of 2022.
According to a report from Bloomberg, the liquidators have initiated a lawsuit seeking $1.3 billion in damages. This action is part of 3AC’s ongoing attempts to recover assets for its creditors after the hedge fund’s liquidation.
Terraform allegedly encouraged 3AC to acquire Luna and TerraUSD tokens by “artificially inflating the price of these tokens,” as stated in court documents. Following the significant crash of TerraUSD and Luna in 2022, 3AC faced considerable losses in its other investments as well.
The fund reportedly held approximately $462 million in Luna at the end of April 2022, according to the court filing. However, the value of these holdings plummeted to over $2,700 by mid-May 2022, following a substantial sell-off. Additionally, the net worth of other digital assets held by 3AC decreased by $858 million during the same period.
Claims From 3AC Co-Founders
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A court in the British Virgin Islands appointed liquidators from the consulting firm Teneo after the hedge fund filed for bankruptcy. Teneo assessed that 3AC owed its creditors roughly $3.3 billion.
In December of the previous year, the court froze around $1.14 billion in assets belonging to the fund’s co-founders. The court barred co-founders Su Zhu and Kyle Davies from transferring or selling these assets.
The amount of compensation from Terraform Labs to 3AC remains uncertain.
In June, the blockchain protocol established by Do Kwon – Terraform – announced its decision to halt operations following a settlement with the SEC. Kwon, who was apprehended in Montenegro last year, is facing charges in both the United States and his home country of South Korea. Last week, a court in Montenegro ruled that Do Kwon should be extradited to South Korea.
Several other cryptocurrency companies were impacted by the fallout from Terra, including lenders such as Celsius, Vauld, and Voyager, as well as exchanges like the historic FTX.
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