3AC Liquids filed a $1.3B claim against Terraform Labs
Collapsed cryptocurrency hedge fund Three Arrows Capital (3AC) is seeking liquidators from bankrupt crypto firm Terraform Labs for losses following the collapse of the Terra ecosystem in May 2022.
According to a report by legal news service Law360, 3AC Liquidators filed a $1.3 billion lawsuit against Terraform Labs in federal court in Delaware in 2016.
In the claim form, 3AC Liquidations alleges that Terraform Labs misled the Singaporean hedge fund about the stability of tokens in the Terra ecosystem, including Terra Algorithm's stable coin TerraUSD (UST) and UST-tied token Terra Luna (LUNA).
Terraform Labs was accused of providing misleading information about UST and Luna
The liquidators, represented by Russell Crumpler and Christopher Farmer of Teneo Holdings, argued that Terraform Labs promoted the tokens in a manner that “artificially inflates the value of its assets.”
Those misrepresentations and omissions caused 3AC to invest heavily in Terra just a few months after UST decoupled from the dollar, causing a major crash in the Terra ecosystem, affecting many cryptocurrency companies.
As such, 3AC Liquidators is seeking damages for the direct purchases of UST and LUNA and related damages for the “total loss of value of 3AC's cryptocurrency investments caused by the collapse of LUNA and UST.”
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The new 3AC liquidators claim comes just months after Terraform Labs co-founder Do Kwon was found guilty of defrauding investors in a civil case with the United States Securities and Exchange Commission in April 2024.
Earlier, Kwon was released from a Montenegrin prison following extradition requests from the United States and South Korea.
3AC is in bankruptcy.
In the year Founded in 2012 by Columbia University graduates Su Zhu and Kyle Davis, 3AC was one of the world's largest crypto hedge funds, with up to $18 billion in assets under management at its peak.
A few months after Terra collapsed, 3AC was unable to meet margin calls from its creditors and in It filed for bankruptcy at the end of 2022. The company is currently undergoing insolvency proceedings in the British Virgin Islands.
Last year, a court in the British Virgin Islands banned 3AC founders Zhu and Davis from transferring or selling assets worth up to $1.1 billion. 3AC's liquidator Teneo estimates that 3AC's creditors will be owed about $3.3 billion after it collapses in 2022.
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