3AC suffered one of the worse crypto hedge fund crashes in 2022, losing over $3 billion in 2022 due to its investments in TerraUSD and LUNA.
Three Arrows Capital (3AC) liquidators have filed a lawsuit against Do Kwon’s defunct crypto company, TerraForm, seeking the repayment of a minimum of $1.3 billion, which it lost during the crypto crash in 2022.
Before Terra’s downfall, 3AC invested heavily in the company’s cryptocurrencies, LUNA and TerraUSD. Thus, Terra’s collapse affected 3AC as it held a large chunk of the company’s reserve assets. Since 2022, both companies have stopped functioning as Terraform continues to repay investor funds.
3AC Wants Compensation
According to Bloomberg, the liquidators claimed that TerraForm manipulated Three Arrows into developing confidence and investing largely in TerraUSD and LUNA. Terra controlled the market for their tokens “in a manner that artificially inflated the price for the assets.” This alleged manipulation shook 3AC’s confidence in Terra’s tokens and led to significant financial losses affecting customers’ and investors’ funds.
Additionally, the liquidators revealed that in January 2022, 3AC purchased $190 million worth of LUNA and held about $450 million by the end of April. A few months later, following the crash, the token lost almost all of its value. The collapse led to a substantial reduction in 3AC’s other investment holdings.
TerraForm Crash Aftermath
Three Arrows Capital is not the only company affected by Terra’s crash. After LUNA lost over 99% of its value in one day, the industry felt shockwaves. Celsius Network, Voyager Digital, CoinFLEX, and other crypto-related firms suffered significant financial losses, with some even facing bankruptcy.
Following TerraForm’s crash in 2022, its co-founder, Do Kwon, assured investors of refunds. However, the company’s moves have not led to significant repayments, with Kwon currently in custody.
Kwon has been arrested in Montenegro for attempting to travel with fake documents. He has yet to be deported as South Korean and U.S. agencies seek extradition. In April 2024, the U.S. Securities and Exchange Commission (SEC) declared him guilty of the civil fraud charges laid against him.
