Liquidators of the defunct crypto hedge fund Three Arrows Capital (3AC) are reportedly pursuing a claim of at least $1.3 billion from TerraForm Labs. This claim follows 3AC’s losses due to the 2022 collapse of the TerraUSD stablecoin and Luna token.

According to an Aug. 12 report by Bloomberg, 3AC’s court-appointed liquidators, Teneo, are accusing TerraForm Labs of manipulating the LUNA and UST markets. They allege TerraForm artificially inflated the values of these tokens before their prices plummeted.

Per court filings quoted by Bloomberg, Teneo stated that 3AC invested heavily in LUNA and UST following the alleged manipulation. This investment decision, according to Teneo, led to severe financial losses for 3AC. Additionally, they claim that the crash of Terra adversely affected other crypto assets held by 3AC.

Three Arrows Capital was once a significant player in the crypto space but collapsed shortly after the TerraUSD and Luna crash. This downfall coincided with the collapse of several other major crypto firms.

Teneo is also seeking to reclaim funds from Three Arrows’ founders, Su Zhu and Kyle Davies, among others.

3AC, which was registered in Singapore, filed for bankruptcy in July 2022 after failing to meet demands from its creditors following a massive market downturn triggered by the Terra collapse.

A year before its collapse, 3AC boasted a $10 billion crypto portfolio. This amount dropped to about $3 billion at the time the company declared insolvency.

3AC’s claim against TerraForm Labs is the latest chapter in its legal challenges following the implosion of its cryptocurrencies. In June, it reached a $4.47 billion settlement with the U.S. Securities and Exchange Commission (SEC) after a jury found the company and its founder, Do Kwon, legally liable for the $60 billion crash.

The SEC initially sought $5.3 billion in fines from both Mr. Kwon and TerraForm. This amount included $4.7 billion in disgorgement and $520 million in civil penalties.

Currently, Do Kwon is under house arrest in Montenegro, awaiting extradition to either the United States or South Korea, where he faces lengthy prison sentences over his role in Terra’s fall.

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