Three Arrows Capital Sues TerraForm Labs for $1.3 Billion
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The liquidators of Three Arrows Capital, a failed hedge fund, are suing TerraForm Labs for $1.3 billion, accusing them of market manipulation that caused the LUNA crash and led to major losses for the fund.

This legal action is part of the liquidators’ efforts to recover funds for the creditors of Three Arrows Capital. However, the outcome of the lawsuit remains uncertain, especially with LUNA’s co-founder currently facing extradition issues.

The liquidators of Three Arrows Capital have filed a lawsuit against TerraForm Labs, seeking $1.3 billion in damages. The lawsuit stems from significant losses the hedge fund suffered during the 2022 crash of TerraUSD and LUNA, tokens co-founded by Do Kwon. The suit alleges that TerraForm’s market manipulation led to the catastrophic crash, which contributed to the collapse of Three Arrows Capital.

According to court documents, Three Arrows’ liquidators claim that TerraForm induced the hedge fund to purchase LUNA and TerraUSD by manipulating the market, artificially inflating their prices before they were wiped out. The liquidators further believe that the LUNA crash also severely impacted the value of the fund’s other digital holdings. At its peak in April 2022, Three Arrows held approximately $462 million worth of LUNA, which plummeted to just over $2,700 by mid-May following a massive selloff of TerraUSD.

Once a prominent player in the crypto hedge fund industry, Three Arrows Capital collapsed shortly after LUNA’s downfall. A British Virgin Islands court appointed liquidators from the consulting firm Teneo to recover assets and repay the hedge fund’s creditors.

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