Liquidators for the collapsed cryptocurrency hedge fund, Three Arrows Capital, are demanding a staggering $1.3 billion from TerraForm Labs, the bankrupt company co-founded by disgraced crypto entrepreneur Do Kwon. The lawsuit alleges that TerraForm manipulated the market to artificially inflate the prices of Luna and TerraUSD tokens before their catastrophic crash in 2022, leading to massive losses for Three Arrows.
The high-profile hedge fund, once a crypto industry titan, imploded shortly after the Luna and TerraUSD collapse, joining a string of crypto businesses that failed amid the market turmoil. Court-appointed liquidators have been working to recoup funds for creditors, with similar claims against the fund’s founders, Su Zhu and Kyle Davies.
TerraForm Labs is already facing legal woes. A US jury found the company and Kwon liable for fraud in April, and the company is now undergoing liquidation proceedings. Kwon, meanwhile, is in custody in Montenegro, awaiting extradition to South Korea or the US to face criminal charges.
The liquidators claim that Three Arrows invested $190 million in Luna as part of a larger $1 billion deal in January 2022. However, the subsequent collapse of TerraUSD sent the value of both tokens plummeting, wiping out nearly $462 million of Three Arrows’ Luna holdings and causing an additional $858 million in losses on other digital assets.
While the lawsuit seeks a substantial amount, the ultimate recovery from TerraForm remains uncertain given its financial state.
