The Liquidators of 3AC Sue Terraform Labs for $1.3 Billion in Compensation
The liquidators of the cryptocurrency fund Three Arrows Capital (3AC) have filed a lawsuit against Terraform Labs, seeking $1.3 billion in compensation for losses incurred after the market collapse in 2022.
TerraForm manipulated the market for Luna and TerraUSD tokens in a way that artificially inflated the price of the assets before they lost their value.
Collapse of Terra and its Consequences for 3AC
This lawsuit stems from May 2022, when the Terra network was shaken by the collapse of its algorithmic stablecoin, terraUSD (UST), and its associated token, LUNA. Despite reassurances from Terra co-founder Do Kwon, the sharp decline in these assets resulted in a $40 billion market loss. A few months later, in July 2022, 3AC declared bankruptcy, attributing its irreparable losses to this collapse.
Accusations Against Terraform Labs
The liquidators of 3AC accuse Terraform Labs of manipulating the market to induce 3AC to buy LUNA and TerraUSD tokens. According to court documents, they allege that Terraform artificially inflated the prices of these assets, leading 3AC to purchase tokens that would later lose all their value.
Terraform Labs, on the other hand, filed for bankruptcy in Delaware, USA, in January 2024. Additionally, Terraform co-founder Do Kwon was found guilty of civil fraud by a Manhattan jury in April 2024, following charges brought by the SEC.
Current Situation of Do Kwon
Since his arrest in March 2023 for using forged travel documents, Do Kwon has been detained in Montenegro. The Montenegrin authorities have yet to rule on his extradition, which has been requested by both the United States and South Korea. Do Kwon’s legal fate remains uncertain as the authorities of both countries have been disputing his extradition for several weeks.
