Three Arrows Capital has sued TerraForm Labs for $1.3 billion. The lawsuit alleges that TerraForm Labs manipulated the LUNA and TerraUSD prices, causing Three Arrows Capital to lose money. This legal action is another example of the aftermath of the Terra ecosystem crash in 2022.
Three Arrows Capital Sues TerraForm Labs Over LUNA Losses
Three Arrows Capital’s liquidators claim that TerraForm Labs was instrumental in the firm’s financial ruination. According to court records, TerraForm Labs lured the hedge fund into investing heavily in LUNA and TerraUSD. They allege that TerraForm Labs sought to manipulate these tokens’ prices before their fall.
The liquidators say that Three Arrows bought $190 million worth of LUNA tokens due to price inflation. After the crash, the value of LUNA from the hedge fund’s portfolio dropped from $462 million to $2,700. This severe drop massively affected Three Arrows’ financial health and was one of the factors that led to its downfall.
The lawsuit also raises questions about the consequences of TerraForm Lab’s behaviour. The failure of the Terra ecosystem had implications, and many investors suffered losses in the cryptocurrency space. Other firms that were also affected by the crash also suffered severe losses.
Three Arrows Capital Seeks Recovery from TerraForm Labs
The lawsuit seeks to regain a significant amount of the money that Three Arrows Capital lost. The liquidators, appointed by the British Virgin Islands court, are in charge of recovering the lost funds for the creditors of the hedge fund. The legal team has argued that TerraForm Labs’ actions led to the downfall of the hedge fund.
Besides LUNA, other cryptocurrencies in Three Arrows’ portfolio also faced a significant decline in value and lost about $858 million. The liquidators noted that TerraForm’s price manipulations were instrumental in this loss. They are now attempting to sue the company for the losses incurred.
The case is the latest in a series of legal issues that TerraForm and its CEO, Do Kwon, are experiencing. Kwon, captured in Montenegro with a forged passport, may be extradited to South Korea or the United States.
His extradition case has been a legal tussle and is still ongoing. However, the Montenegrin court has stopped the extradition process even though the High Court has ruled that Kwon should be extradited to South Korea.
The result of this lawsuit may have a positive or negative impact on the cryptocurrency industry. If Three Arrows Capital does well, it will provide a reference point for other firms impacted by the Terra debacle. This may lead to more legal battles against TerraForm Labs and its related companies.
