AUS
NZ
UK
CA
USA
FRA
GER
ESP
ITA
NLD
PRT
SWE
GRC
IND
POL
BRA
ZAF
RUS
CHN
UAE
The liquidators of the defunct cryptocurrency hedge fund Three Arrows Capital (3AC) are pursuing damages from Terraform Labs in connection with the losses sustained after the collapse of the Terra ecosystem in May 2022.
On August 9, the liquidators filed a $1.3 billion claim against Terraform Labs in the bankruptcy proceedings in Delaware federal court, as reported by legal news service Law360.
The liquidators allege that Terraform Labs misrepresented the stability of tokens within the Terra ecosystem, including the algorithmic stablecoin TerraUSD (UST) and its associated token Terra Luna (LUNA). According to the proof of claim, Terraform Labs provided misleading information about the stability and value of these tokens, which led 3AC to make substantial investments in Terra shortly after UST lost its peg to the dollar. This contributed to a significant collapse within the Terra ecosystem, adversely affecting numerous cryptocurrency firms.
Represented by Russell Crumpler and Christopher Farmer of Teneo Holding, the 3AC liquidators claim that the misleading promotions by Terraform Labs inflated the prices of UST and LUNA, resulting in substantial financial losses for 3AC. They are seeking damages for the direct losses from their purchases of UST and LUNA, as well as additional compensation for the total devaluation of their cryptocurrency holdings following the collapse of these tokens.
This latest claim follows a civil case in April 2024 in which Terraform Labs co-founder Do Kwon was found liable for defrauding investors by the U.S. Securities and Exchange Commission. Kwon had previously been released from prison in Montenegro while facing extradition requests from both the United States and South Korea.
Three Arrows Capital, established in 2012 by Su Zhu and Kyle Davies, was a major player in the crypto hedge fund space, managing up to $18 billion in assets at its peak. However, the firm could not meet margin calls after the Terra crash and filed for bankruptcy in late 2022. The ongoing insolvency proceedings are taking place in the British Virgin Islands, where a court has also prohibited Zhu and Davies from transferring or selling assets valued up to $1.1 billion. Teneo estimates that creditors are owed approximately $3.3 billion following the firm’s collapse.
