Three Arrows Capital Liquidators File $1.3 Billion Claim Against Terraform Labs
Liquidators of Three Arrows Capital (3AC) have taken action by filing a claim against Terraform Labs for $1.3 billion. The claim, submitted to the U.S. Bankruptcy Court for the District of Delaware on August 9, 2024, alleges that Terraform Labs engaged in market manipulation that resulted in significant losses for the now-defunct cryptocurrency hedge fund.
Allegations of Market Manipulation and Losses
- The claim states that Terraform Labs manipulated the market for LUNA and UST, artificially inflating prices.
- As a result, 3AC suffered massive losses when the Terra ecosystem collapsed in May 2022.
- The liquidators are seeking damages for direct losses on UST and LUNA purchases, as well as associated losses on other cryptocurrency investments.
Impact of the Terra Collapse
The collapse of the Terra ecosystem had far-reaching consequences in the cryptocurrency industry, with major players like 3AC facing significant setbacks. At its peak, 3AC managed assets worth up to $18 billion, making it one of the world’s largest crypto hedge funds.
Details of the Claim and Investments
- 3AC liquidators claim that Terraform Labs provided misleading information about the stability of its tokens, leading to substantial investments from 3AC.
- 3AC acquired $190 million worth of Luna in January 2022, which rose to $462 million by late April 2022.
- Following the collapse of TerraUSD in May, the value of 3AC’s Luna holdings plummeted to $2,700, causing significant losses across its digital asset portfolio.
Legal Action and Settlement
- The 3AC liquidators’ claim comes in the wake of Terraform Labs and its former CEO, Do Kwon, agreeing to a $4.5 billion settlement with the SEC in July 2024.
- Kwon, who faces extradition to South Korea, is currently dealing with charges in both the United States and South Korea following the collapse of the Terra ecosystem.
Hot Take: Takeaway for Crypto Investors
Cryptocurrency investors should remain vigilant and conduct thorough research before making investment decisions. The case of Three Arrows Capital and Terraform Labs serves as a cautionary tale about the risks associated with market manipulation and misinformation in the crypto industry. By staying informed and aware of potential red flags, investors can protect themselves from similar situations and navigate the volatile landscape of digital assets more effectively.
3AC vs Terraform Labs Claim
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