Liquidators of the failed crypto hedge fund Three Arrows Capital (3AC) are reportedly seeking $1.3 billion from Terraform Labs, the bankrupt stablecoin firm co-founded by Do Kwon.
According to a new report by Bloomberg, the liquidators filed a claim in the U.S Bankruptcy Court for the District of Delaware seeking funds 3AC allegedly lost as a result of the 2022 crash of Terraform’s TerraUSD (UST) and Luna (LUNA) tokens.
The claim alleges that 3AC was induced into acquiring Luna and TerraUSD due to Terraform’s market manipulation “in a manner that artificially inflated the price for the assets.”
Three Arrows and several other crypto businesses collapsed soon after Luna and TerraUSD crashed. A British Virgin Islands court subsequently appointed liquidators who are seeking to recover a similar amount from the 3AC founders, Su Zhu and Kyle Davies, and other firms to repay Three Arrows’ creditors.
In April, a jury found Terraform and Kwon liable for fraud in a US government lawsuit over Luna’s collapse.
Three Arrows’ reportedly held about $462 million worth of Luna at the end of April 2022, but that value plummeted to about $2,700 by May 14. The net value of Three Arrows’ other digital holdings plummeted by about $858 million over the same period.
Terraform filed Chapter 11 bankruptcy in January and is preparing to liquidate after it was found liable for fraud earlier this year, the report says. Kwon was arrested last year in Montenegro, and a court ruled that he should be extradited to South Korea to face charges, though that extradition process was paused last week.
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