Shortly after Celsius Network made headlines by suing Tether, the liquidators of the now-bankrupt crypto hedge fund, Three Arrows Capital, 3AC also initiated a lawsuit against TerraForm Labs, seeking $1.3 billion in damages.
Market manipulation by inflating prices?
The lawsuit centers on the losses incurred during the 2022 collapse of TerraUSD and LUNA, cryptocurrencies co-founded by Do Kwon.
The liquidators allege that TerraForm Labs engaged in market manipulation, artificially inflating the prices of these tokens before their value plummeted. This caused financial harm to Three Arrows.
If we take a look at the court documents, the liquidators claim that TerraForm Labs induced Three Arrows to invest in LUNA and TerraUSD by manipulating the market, which ultimately led to the tokens’ collapse.
At the peak of its holdings in April 2022, Three Arrows owned approximately $462 million worth of LUNA.
But then, following a massive selloff of TerraUSD, this value dropped to just over $2,700 by mid-May. It was over.
Crash and burn
Three Arrows Capital quickly unraveled after LUNA’s crash. A court in the British Virgin Islands appointed liquidators from the consulting firm Teneo to recover assets and repay the hedge fund’s creditors.
The lawsuit against TerraForm Labs is one of several legal actions taken by the liquidators, who are also pursuing claims against Three Arrows’ founders, Su Zhu and Kyle Davies.
The success of this lawsuit remains pretty uncertain, especially in terms of potential recoveries from TerraForm Labs.
Following the collapse of his cryptocurrency project, Do Kwon was arrested in Montenegro last year and faces charges in both the United States and his native South Korea.
Kwon’s fate
After the arrest, a Montenegro court ruled that Kwon should be extradited to South Korea, but this decision has faced repeated delays again and again.
The latest postponement came at the request of Montenegro’s top prosecutor, Minister of Justice Andrej Milović, and continues to prolong the legal proceedings involving Kwon and TerraForm Labs.
