Three Arrows Capital (3AC) liquidators are looking to recover at least $1.3 billion from Terraform Labs

Court papers show that Terraform Labs allegedly induced 3AC to purchase Terra (LUNA) by manipulating the market for these tokens, causing their prices to be artificially inflated

Liquidators handling the Three Arrows Capital (3AC) bankruptcy are seeking to recoup at least $1.3 billion from Terraform Labs, according to court filings.

The liquidators claim that Terraform Labs manipulated the market for its Terra (LUNA) tokens by engaging in practices that artificially inflated their prices, which allegedly enticed 3AC to purchase the tokens.

3AC, once a prominent hedge fund in the cryptocurrency industry, filed for Chapter 15 bankruptcy protection in 2022. This legal maneuver shields 3AC's US assets while a liquidation process unfolds in the British Virgin Islands, where the company is headquartered.

As of April 2022, 3AC held approximately $462 million in Luna tokens, which later crashed, rendering them nearly worthless, according to the court documents.

At the time of the bankruptcy filing, 3AC's Luna holdings were valued at only $2,700.

Terraform Labs and its co-founder, Do Kwon, agreed to pay a record-breaking $4.5 billion to settle charges brought by the US Securities and Exchange Commission (SEC) earlier in June.

The SEC filed a civil lawsuit against Terraform Labs and Do Kwon in May 2022, accusing them of defrauding investors with their TerraUSD (UST) stablecoin and Luna token.

It remains unclear how much money 3AC's liquidators will ultimately be able to recover from Terraform Labs, as the case is still pending in the US Bankruptcy Court for the District of Delaware.

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