- 3AC Lawsuit Against TerraForm Labs
- Challenges of 3AC Liquidation
- Conclusion of TerraForm and 3AC Situation
Three Arrows Capital (3AC), once an influential crypto hedge fund, is now at the center of legal disputes. The 3AC liquidators have filed a $1.3 billion lawsuit against TerraForm Labs, accusing the company of market manipulation. This move aims to recover funds for 3AC's creditors after the fund's collapse.
3AC Lawsuit Against TerraForm Labs
Three Arrows Capital (3AC) liquidators allege that TerraForm Labs manipulated the markets for Luna and TerraUSD, leading to artificially inflated prices for these tokens. These actions, liquidators claim, induced 3AC to invest significantly in these assets before they were wiped out, causing substantial losses in the fund's other digital holdings as well.
In early 2022, 3AC acquired $190 million worth of Luna as part of a $1 billion deal involving investments from other firms. However, a massive sell-off of TerraUSD a few months later triggered a sharp decline in both TerraUSD and Luna, significantly depleting the value of 3AC's investment.
By the end of April 2022, 3AC's Luna holdings were valued at approximately $462 million, but by May 14, that value had plummeted to just over $2,700. Simultaneously, the net value of 3AC's other digital assets dropped by about $858 million.
Challenges of 3AC Liquidation
Following the fund's collapse, a British Virgin Islands court appointed liquidators from the consulting firm Teneo to recover assets for 3AC's creditors. This lawsuit against TerraForm Labs is just one of several actions initiated by liquidators, who are also pursuing claims against 3AC founders Su Zhu and Kyle Davies.
Meanwhile, sources revealed that Zhu has been attempting to offload at least one of his prestigious "good-class bungalows" amid the company’s ongoing liquidation process.
Notably, following the crash of the LUNA project, TerraForm's co-founder Do Kwon was arrested in Montenegro last year. He now faces charges in both the United States and his home country, South Korea.
Conclusion of TerraForm and 3AC Situation
The collapse of TerraForm Labs and Three Arrows Capital highlighted vulnerabilities in the world of cryptocurrencies and digital assets. This $1.3 billion lawsuit underscores the liquidators' attempt to recover funds and cover the significant losses suffered by their creditors. Despite the uncertainty over how much money can be recovered, this legal action remains a crucial milestone in efforts to bring order to the troubled industry.
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