Liquidators of the failed crypto hedge fund Three Arrows Capital (3AC) filed a claim in Delaware federal court on August 9, and are seeking $1.3 billion in damages from Terraform Labs.
Liquidators of the failed crypto hedge fund Three Arrows Capital (3AC) filed a claim in Delaware federal court on August 9, and are seeking $1.3 billion in damages from Terraform Labs, following the Terra ecosystem's downfall in May 2022.
The liquidators allege that Terraform Labs misled 3AC about the stability of Terra’s tokens, including the algorithmic stablecoin TerraUSD (UST) and its token Luna (LUNA). They argue that Terraform Labs promoted these tokens in a way that artificially inflated their prices, leading 3AC to invest heavily just before UST lost its dollar peg and the Terra ecosystem crashed, affecting many crypto firms.
Representatives Russell Crumpler and Christopher Farmer from Teneo Holding argue that 3AC suffered direct and associated damages due to the collapse of LUNA and UST. This claim follows Terraform Labs co-founder Do Kwon being found liable for investor fraud in a U.S. SEC civil case in April 2024. Kwon was previously released from a Montenegrin prison amid extradition requests from the U.S. and South Korea.
Three Arrows Capital, founded in 2012 by Su Zhu and Kyle Davies, managed up to $18 billion at its peak. It declared bankruptcy in late 2022 after failing to meet margin calls post-Terra crash and is undergoing insolvency proceedings in the British Virgin Islands. Last year, a court there restricted Zhu and Davies from transferring or selling assets worth up to $1.1 billion. Teneo, the liquidator, estimates 3AC creditors are owed roughly $3.3 billion.
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