Three Arrows Capital Files $1.3 Billion Lawsuit Against Terraform Labs

The liquidators of defunct cryptocurrency hedge fund Three Arrows Capital (3AC) have filed a $1.3 billion lawsuit against Terraform Labs for losses suffered following the fund’s 2022 collapse.

The ongoing process began in May 2022 when the Terra network’s algorithmic stablecoin terraUSD (UST) and LUNA suffered a $40 billion collapse despite assurances from co-founder Do Kwon. 3AC filed for bankruptcy in July, stating that Terra’s collapse caused irreparable losses.

According to Bloomberg, liquidators said in court documents that TerraForm encouraged 3AC to purchase Luna and TerraUSD, and the company also alleged that Terra manipulated the market before the tokens in question were removed from circulation.

Terraform filed for bankruptcy in the US state of Delaware in January 2024. Do Kwon was found guilty of civil fraud charges by a Manhattan jury before the US Securities and Exchange Commission (SEC) in April 2024.

Kwon remains in Montenegro after being arrested in March 2023 for attempting to use fake travel documents. He is awaiting a final decision from Montenegrin authorities on where he will be extradited.