The liquidators of Three Arrows Capital (3AC) have taken legal action against TerraForm Labs, claiming that the bankrupt digital assets company manipulated the market for Luna and TerraUSD. According to the liquidators, this manipulation resulted in artificially inflated prices for these tokens, ultimately leading to heavy losses for 3AC.
In January 2022, 3AC invested $190 million in Luna as part of a larger deal involving other firms. However, a significant sell-off of TerraUSD shortly after the investment caused a sharp decline in both TerraUSD and Luna prices. As a result, the value of 3AC’s Luna holdings plummeted from $462 million to just over $2,700 by May 14, causing substantial losses for the fund.
TerraForm Labs, which filed for Chapter 11 bankruptcy in January, is currently undergoing liquidation after being found guilty of fraud earlier this year. The outcome of the liquidation process remains uncertain, leaving creditors unsure of how much money can be recovered.
Following the collapse of LUNA, Three Arrows Capital saw its demise, leading to the appointment of liquidators to recover assets and repay creditors. The lawsuit against TerraForm Labs is just one of the actions taken by the liquidators, who are also pursuing claims against 3AC’s founders, Su Zhu and Kyle Davies.
Amid the liquidation process, sources have revealed that Su Zhu has been attempting to sell off one of his prestigious properties. Additionally, TerraForm’s co-founder Do Kwon, who was arrested in Montenegro last year, is facing legal charges in the United States and South Korea following the crash of the LUNA project.
Overall, the collapse of Three Arrows Capital and the subsequent legal actions against TerraForm Labs highlight the risks and challenges faced by investors in the volatile world of cryptocurrency. The case serves as a cautionary tale for those involved in the crypto industry, emphasizing the importance of due diligence and risk management to avoid significant financial losses.
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