Three Arrows Capital (3AC), a once-prominent crypto hedge fund, is now facing the aftermath of its collapse with its liquidators pursuing a $1.3 billion lawsuit against TerraForm Labs. The lawsuit alleges that TerraForm Labs manipulated the market for Luna and TerraUSD, leading to inflated prices that ultimately resulted in heavy losses for 3AC.
In January 2022, 3AC made a significant investment of $190 million in Luna as part of a larger $1 billion deal. However, a massive sell-off of TerraUSD months later caused a sharp decline in both TerraUSD and Luna, depleting the value of 3AC’s investment. By May 14, the value of 3AC’s Luna holdings had plummeted from $462 million to just over $2,700, resulting in substantial losses for the fund.
TerraForm Labs filed for Chapter 11 bankruptcy in January, and the company is currently in the process of liquidation after being found liable for fraud. The liquidators appointed by a British Virgin Islands court, from the consulting firm Teneo, are now working to recover assets to repay 3AC’s creditors. In addition to the lawsuit against TerraForm Labs, the liquidators are also pursuing claims against 3AC’s founders, Su Zhu and Kyle Davies.
The aftermath of 3AC’s collapse has also had personal consequences for individuals involved. Sources have revealed that Su Zhu, one of 3AC’s founders, has been attempting to sell off some of his assets, including prestigious “good-class bungalows,” amid the company’s liquidation process. Meanwhile, TerraForm Labs’ co-founder, Do Kwon, faced arrest in Montenegro last year following the crash of the LUNA project. Kwon now faces charges in both the United States and South Korea.
As the legal battle between 3AC’s liquidators and TerraForm Labs continues, the amount of money that can be recovered remains uncertain. The fallout from 3AC’s collapse serves as a cautionary tale for investors in the crypto industry, highlighting the risks and potential consequences of market manipulation and volatile investments.
Overall, the collapse of Three Arrows Capital and the subsequent legal actions against TerraForm Labs underscore the challenges and complexities inherent in the crypto investment landscape. As the dust settles on this high-profile case, investors and industry participants alike are left to grapple with the implications of what has transpired.
Leave a Reply