Defunct cryptocurrency hedge fund Three Arrows Capital's (3AC) liquidators have sued Terraform Labs for $1.3 billion, for losses the fund suffered after the 2022 crash, Bloomberg reported on Monday.

In June 2023, the liquidators sought $1.3 billion from the founders of 3AC, Su Zhu and Kyle Davies.

The saga started unfolding in May 2022, when the Terra network saw its algorithmic stablecoin terraUSD (UST) and its companion token, LUNA, suffer a $40 billion collapse despite assurances from co-founder Do Kwon. By July, 3AC filed for bankruptcy stating that Terra's collapse caused irrecoverable losses.

This case alleges that TerraForm induced 3AC to purchase Luna and TerraUSD by manipulating the market for these tokens “in a manner that artificially inflated the price for the assets” before they were wiped-out, the liquidators said in court papers, as per Bloomberg.

Terraform filed for bankruptcy in Delaware, U.S. in January 2024. Do Kwon was found guilty by a Manhattan jury on civil fraud charges brought the U.S. Securities and Exchange Commission (SEC) in April 2024.

Do Kwon remains in Montenegro where he has been since his arrest in March 2023 for attempting to use fake travel documents. He awaits a final decision from Montenegro's authorities on where he is to be extradited. Both South Korean and U.S. authorities have been seeking his extradition.

Read More: 3AC Co-Founder Kyle Davies Says He Won’t Apologize for Crypto Hedge Fund Going 'Bankrupt'

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