Three Arrows Capital Requests $1.3B From Terraform Labs to Recoup UST, LUNA Collapse Losses

As per multiple sources, 3AC's liquidators are seeking a minimum of $1.3 billion in damages following the $40 billion collapse of Terra and its ecosystem

Singapore-based crypto hedge fund Three Arrows Capital (3AC) is reportedly seeking at least $1.3 billion from Terraform Labs, the company behind the failed TerraUSD (UST) and Luna (LUNA) tokens.

3AC's liquidators are pursuing the claim, alleging that Terraform Labs misled 3AC about the soundness of Terra's ecosystem.

The liquidators, represented by Russell Crumpler and Christopher Farmer of Teneo Holdings, allege that Terraform Labs misrepresented and advertised the tokens in a way that “artificially inflated the price for the assets.”

3AC's claim comes after a New York civil court found Terraform Labs co-founder and former CEO Do Kwon liable for defrauding investors by lying to them about UST.

3AC, which collapsed in 2022, had purchased $190 million worth of LUNA in January of that year as part of a multi-firm deal that saw a total of $1 billion being invested in the Luna token.

However, TerraUSD lost its algorithmically-backed peg a few months later, triggering a massive selloff. This led to the devaluation of all assets in the Terraform ecosystem, with 3AC being among the hardest-hit investors.

According to court documents, 3AC held around $462 million in LUNA in April 2022. However, by mid-May, the collapse had shrunk its value to just $2,700.

3AC's holdings in other assets also saw a steep decline during this period, ultimately leading to the firm's bankruptcy in late June 2022.

Meanwhile, Do Kwon's legal troubles continue, with both South Korean and U.S. investigators seeking to have him brought to their shores for trial over the Terraform Labs’ bankruptcy.

However, Kwon has found a brief respite in Montenegro after being arrested in March 2023 for attempting to fly to Dubai with fake passports and documents. He was sentenced to four months in jail and remained in custody for a year until being released on bail in March 2024.

Both U.S. and South Korean authorities have had multiple requests for Kwon's extradition denied. Interestingly, Kwon has expressed a preference for being tried in South Korea, where the penalties for financial crimes are less harsh than in the U.S.

While Montengero’s courts, prosecutors, and government figures initially seemed torn on which way to send him, on Aug. 1, Montenegro courts ruled to have him extradited to South Korea.

However, local media now reports that just a week later, Montenegro's Supreme Court has postponed Kwon's extradition once more at the request of its top prosecutor, Minister of Justice Andrej Milović.

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