Failed Crypto Hedge Fund Seeks $1.3 Billion for Terra Collapse in 2022

Three Arrows Capital's liquidators are now pursuing $1.3 billion from TerraForm Labs following the 2022 collapse of Terra (LUNA).

The request for this substantial amount relates to the losses sustained by Three Arrows Capital after the TerraUSD and Luna tokens, linked to TerraForm Labs and its founder Do Kwon, crashed in 2022.

Court documents allege that TerraForm Labs played a role in inflating the market value of these tokens, encouraging Three Arrows to invest heavily. This alleged market manipulation led to substantial losses for Three Arrows, impacting their entire portfolio.

After the Terra crash, Three Arrows Capital, a once-leading cryptocurrency hedge fund, went bankrupt. The British Virgin Islands court appointed Teneo, a consulting firm, as the liquidators to recover funds from Three Arrows’ founders, Su Zhu and Kyle Davies, and other involved parties.

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In April, a jury also held TerraForm Labs and Do Kwon accountable for fraud in a U.S. lawsuit related to the Luna collapse. TerraForm, which filed for Chapter 11 bankruptcy in January, is now preparing for liquidation following the fraud verdict. The total amount that might be recovered from TerraForm remains uncertain.

Alexander Stefanov