3AC Seeks $1.3B from Do Kwon’s Terraform Labs After TerraUSD, Luna Debacle
3AC are seeking $1.3 billion in fines from Terraform Labs. (Photo by Filip Filipovic/Getty Images)
- Three Arrows Capital’s $462 million worth of LUNA tumbled to just $2,700 following Terraform Labs’ collapse.
- Do Kwon’s extradition from Montenegro to South Korea has been postponed.
- Terraform Labs and Do Kwon have agreed to pay the SEC $4.47 billion in fines.
Failed Singapore-based crypto hedge fund Three Arrow Capital (3AC) is requesting $1.3 billion from Terraform Labs to claw back losses from the collapse of TerraUSD and Luna tokens in 2022.
Terraform Labs
As per multiple sources , 3AC’s liquidators are seeking a minimum of $1.3 billion in damages following the $40 billion collapse of Terra and its ecosystem back in May 2022.
Representing the liquidators, Russell Crumpler and Christopher Farmer of corporate advisory firm Teneo Holdings argued that Terraform Labs misled 3AC regarding the soundness of Terra’s ecosystem.
They allege that Terraform Labs misrepresented and advertised the tokens in a way that “artificially inflated the price for the assets.” As such, 2022’s crypto market crashed, partially due to Terraform Labs.
The news follows a New York Civil court ruling that found Do Kwon, Terraform Labs co-founder and former CEO, liable for defrauding investors by lying to them about the algorithmically stabilized stablecoin, TerraUSD (UST).
3AC Collapse
3AC says it purchased $190 million worth of LUNA in January 2022 as part of a multi-firm deal investment worth $1 billion. However, TerraUSD lost its algorithmically-backed peg a few months later, triggering a massive selloff.
This devalued all assets in the Terraform ecosystem, and investors were hit hard. Court documents revealed that 3AC held around $462 million in LUNA in April 2022. By mid-May, the collapse had shrunk its value to just $2,700.
In that same period, 3AC’s holdings sunk by approximately $858 million, crippling the firm and forcing it into bankruptcy in late-June, 2022.
Extradition Troubles
The fallout from TerraForm Labs’ bankruptcy has put its co-founder, Do Kwon, in legal and financial trouble. At present, both South Korean and U.S. investigators wish to have him brought to their shores for trial.
Curiously, however, Kwon has found a brief respite in Montenegro. In March 2023, he was caught attempting to fly to Dubai with fake passports and documents. He was arrested and sentenced to four months in jail. He remained in custody for a year until being released on bail in March 2024.
Since then, both U.S. and South Korean authorities have battled over Kwon’s extradition and have had multiple requests denied. Interestingly, Kwon favors being tried in South Korea, where penalties for financial crimes are less harsh than in the U.S.
Montenegro courts, prosecutors, and government figures seemed divided on which way to send him. That was until Aug.1, when Montenegro courts ruled to have him extradited to South Korea.
Now, local media reports that, just a week later, Montengero’s Supreme Court has postponed Kwon’s extradition once more at the request of its top prosecutor, Minister of Justice Andrej Milović.
