Liquidators seek $1.3b from TerraForm Labs over 3AC losses

Liquidators of defunct cryptocurrency hedge fund Three Arrows Capital have reportedly sought at least $1.3 billion from TerraForm Labs.

The claim stems from losses suffered by 3AC following the collapse of its TerraUSD stablecoin and Luna (LUNA) token in 2022, Bloomberg reported on August 12.

Liquidators of failed crypto hedge fund Three Arrows Capital are seeking at least $1.3 billion from bankrupt TerraForm Labs for losses suffered by the fund after its TerraUSD and Luna tokens crashed in 2022 https://t.co/4io1Fhnp9A

— Bloomberg Crypto (@crypto) August 12, 2024

The report noted that 3AC’s court-appointed liquidators, Teneo, accused TerraForm of manipulating the LUNA and UST markets, artificially inflating their value before their prices crashed.

According to court documents cited by Bloomberg, Teneo said that 3AC invested heavily in two tokens following the alleged manipulation, a decision that ultimately caused 3AC to suffer significant financial losses. In addition to direct losses from the failed tokens, Teneo alleged that the Terra collapse also negatively impacted other crypto assets held by 3AC.

The company was once a major player in the crypto space, but it collapsed shortly after the collapse of TerraUSD and Luna, as well as several other major crypto companies.

Teneo is also aiming to raise funds from individuals including Three Arrows founders Su Zhu and Kyle Davies.

Davies told crypto journalist Laura Shin in an extensive interview earlier this year that he was not upset about his company’s collapse.

Singapore-listed 3A filed for bankruptcy in July 2022 after failing to meet creditor demands following a major market crash triggered by the Terra crash. A year ago, it had a $10 billion crypto portfolio that had fallen to around $3 billion by the time the company declared bankruptcy.

3AC’s lawsuit against TerraForm Labs is the latest chapter in the organization’s legal woes stemming from the cryptocurrency crash. In June, it reached a $4.47 billion settlement with the U.S. Securities and Exchange Commission after a jury ruled that the company and its founder, Do Kwon, were legally liable for the $60 billion collapse.

The SEC had initially sought a total of $5.3 billion in fines from both Mr. Kwon and TerraForm, including $4.7 billion in ill-gotten gains and $520 million in civil penalties.

Do Kwon is currently under house arrest in Montenegro, awaiting extradition to the United States or South Korea, where he faces lengthy prison sentences for his role in the downing of Terra.