Three Arrows Slams TerraForm Labs With $1.3 Billion Suit

Lawyers and other legal practitioners will be enjoying the month of August. The month is not even halfway done yet, and we’ve seen multiple lawsuits, especially in the crypto industry. From Tether to Celsius, it seems everyone is just suing each other, and Three Arrows is the latest to join the game. 

More: Terraform Labs Seeks Bankruptcy Protection in the United States

The now-defunct crypto hedge fund Three Arrows Capital has joined the lawsuit bandwagon, seeking $1.3 billion from the digital assets company TerraForm Labs Pte, co-founded by DoKwon. What makes the case even more interesting is that TerraForms is very much bankrupt as of this writing. 

The 1.3 billion-dollar lawsuit is apparently connected to the losses Three Arrows had to bear when the two tokens co-founded by DoKwon—TerraUSD and LUNA—crashed in 2022. The suit claims TerraForm’s market manipulation caused the crash, which ultimately led to Three Arrows’ demise.

The court filings claimed TerraForm Labs allegedly artificially inflated the prices for its coins TerraUSD and Luna and then induced Three Arrows to invest heavily in those tokens, which they did. When both tokens eventually crashed, Three Arrows crashed right along with them.

To put it in perspective, as of April 2022, when Three Arrows invested in the tokens, they held $462 million worth of LUNA. The LUNA they held was only worth $2,700 when the crash came by mid-May. It would have been unbelievable if it didn’t actually happen.

But it was not just LUNA Three Arrows lost on. The value of the company’s other crypto holdings went down by around $858 million. After LUNA crashed hard, Three Arrows didn’t take much time to collapse and eventually liquidate. 

A British Virgin Islands court appointed liquidators to recover funds from the founders of Three Arrows, Su Zhu and Kyle Davies, to raise funds to repay the company’s creditors. But as for recovering money from TerraForm, things are looking very uncertain now.

TerraForm Labs filed for Chapter 11 bankruptcy in January and is currently preparing for liquidation. TerraForm’s CEO, DoKwon, is also facing legal troubles. He was arrested last year and has been charged both in the United States and in South Korea. 

Both the US and South Korea have been debating who should extradite him to their country; however, a Montenegro court has also ruled that Kwon should be extradited to South Korea. 

So, as it stands, TerraForm, the company expected to pay $1.3 billion, has been bankrupt since January. The company’s CEO is also facing a mandatory trip to South Korea. With all of these developments currently ongoing, the feasibility of recovering $1.3 billion is looking mighty shaky, but what do we know? It’s up to the court to decide what will happen, but whichever it goes, it will be a groundbreaking decision. 

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