According to PANews, the liquidators of the bankrupt crypto hedge fund Three Arrows Capital are seeking at least $1.3 billion in compensation from TerraForm Labs. This move aims to recover losses incurred by the fund following the collapse of TerraUSD and Luna tokens in 2022. Court documents reveal that TerraForm allegedly manipulated the market and artificially inflated the prices of these assets, leading Three Arrows to invest in Luna and TerraUSD. The subsequent token crash resulted in significant losses for the hedge fund, not only in these tokens but also in other investments.

The liquidators stated that Three Arrows Capital purchased $190 million worth of Luna in January 2022. A few months later, a massive sell-off of TerraUSD caused Luna's value to plummet. By the end of April 2022, Three Arrows held approximately $462 million worth of Luna, but by May 14, the value of their holdings had dropped to just over $2,700. Additionally, the net value of Three Arrows Capital's other digital assets decreased by around $858 million.

It remains unclear how much the liquidators can recover from TerraForm. In January of this year, TerraForm filed for bankruptcy protection under Chapter 11. In April, a New York jury found TerraForm Labs and its founder Do Kwon guilty of crypto asset securities fraud, leading to TerraForm's plans to dissolve its business. Do Kwon was arrested in Montenegro last year and currently faces charges in both the United States and South Korea. A Montenegrin court recently ruled that Do Kwon should be extradited to South Korea.