Terra: Three Arrows Capital liquidators seek $1.3 billion from Terraform Labs

1. 3AC liquidators are suing Terraform Labs, seeking $1.3 billion in damages for losses suffered after the implosion of LUNA and UST.
2. 3AC accuses Terraform Labs of manipulating the market to induce them to buy LUNA and TerraUSD tokens, which then lost all their value, contributing to 3AC's bankruptcy in July 2022.
3. Terraform co-founder Do Kwon is currently being held in Montenegro, with extradition requests pending from the United States and South Korea, on charges of civil fraud and other offenses.

Crypto fund liquidators Three Arrows Capital (3AC) have filed a complaint against Terraform Labs, claiming $1.3 billion as compensation for losses suffered after the market crash in 2022.

TerraForm induced 3AC to purchase Luna and TerraUSD tokens by manipulating the market for these tokens in a manner that artificially inflated the price of the assets before they lost their value.

Terra Collapse and Consequences for 3AC

The origin of this lawsuit dates back to May 2022, when the network Earth was shaken by the collapse of its stablecoin algorithmic terraUSD (UST) and its associated token, LUNA. Despite assurances from Terra's co-founder, Do Kwonthe sudden fall in these assets has caused a $40 billion loss in market. A few months later, in July 2022, 3AC declared bankruptcy, blaming its irreparable losses on the collapse.

Accusations against Terraform Labs

The liquidators of 3AC accuse Terraform Labs of market manipulation to induce 3AC to purchase LUNA and TerraUSD tokens. According to court filings, they allege that Terraform artificially inflated the prices of these assets, causing 3AC to purchase tokens that would later lose all of their value.

Terraform Labs, for its part, filed for bankruptcy in Delaware, United States, in January 2024. In addition, Do Kwonco-founder of Terraform, was convicted of civil fraud by a Manhattan jury in April 2024, following charges brought by the SEC.

Current situation of Do Kwon

Since his arrest in March 2023 for using false travel documents, Do Kwon is being held in Montenegro. The Montenegrin authorities have yet to decide on his extraditionrequested by both the United States and South Korea. Do Kwon's legal fate therefore remains uncertain, while the authorities of the two countries have been arguing over his extradition for many weeks.

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