3AC Demands $1.3B Compensation From Terraform Over Luna Crash

Teneo Restructuring, the liquidators hired to oversee the bankruptcy proceedings of the collapsed crypto hedge fund Three Arrows Capital (3AC), are seeking at least $1.3 billion in compensation from Terraform Labs, the bankrupt digital assets company co-founded by Do Kwon.

3AC Liquidators Seeks $1.3B from Terraform Labs

According to Bloomberg, the liquidators filed the lawsuit to make up for the losses the firm suffered after the collapse of TerraUSD and Luna tokens in 2022. They claimed that TerraForm Labs manipulated the market to inflate the value of TerraUSD and Luna, which caused 3AC to invest heavily in these tokens. 

Furthermore, the liquidators detailed that Three Arrows Capital acquired $190 million worth of Luna in January 2022 as part of a larger $1 billion deal that included other investment firms. Therefore, the staggering crash of TerraUSD and Luna later that year led to 3AC losing not only its investments in those tokens but also substantial losses in its other holdings. 

Per court documents, 3AC held about $462 million worth of Luna at the end of April 2022 however, that value plummeted over $2,700 by mid-May 2022, after a massive sell-off. Furthermore, the net value of other digital holdings of the hedge fund fell by $858 million at the same time.

3AC’s Bankruptcy Ordeal

Once considered a thriving Singaporean cryptocurrency hedge fund, Three Arrows Capital’s woes date back to the crash of Luna and TerraUSD which affected several other large crypto companies, wiping out millions of dollars from the industry. 

Following 3AC’s collapse, a British Virgin Islands court appointed liquidators from the consulting firm Teneo to manage it’s assets and recover money for its creditors. The $1.3 billion claim against TerraForm is part of these efforts.

However, it is still unclear how much of the $1.3 billion claim 3AC will be able to recover from TerraForm Labs.

TerraForm Labs on its part is already facing legal challenges. Earlier this year, a U.S. court found TerraForm and Do Kwon guilty of fraud related to the Luna crash. The company filed for bankruptcy in January and is now preparing to liquidate. 

Kwon, who was arrested in Montenegro last year, is facing possible extradition to South Korea and charges in both the U.S. and his native country.