Liquidators for Three Arrows Capital (3AC), the now-defunct crypto hedge fund, have filed a lawsuit seeking $1.3 billion in damages from TerraForm Labs.

This legal action is part of ongoing efforts to recover funds for Three Arrows’ creditors after the fund’s liquidation.

The Uncertain Fate of Do Kwon Amidst LUNA Lawsuit

The lawsuit stems from losses suffered during the 2022 crash of TerraUSD and LUNA, tokens co-founded by Do Kwon.  The suit alleges that TerraForm’s market manipulation led to the catastrophic crash in 2022 that contributed to Three Arrows’ collapse.

“TerraForm induced Three Arrows 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,” Three Arrows’ liquidators said in a court document, as reported by Bloomberg.

Read more: Top Crypto Bankruptcies: What You Need To Know

Furthermore, the liquidators believe that the LUNA crash significantly impacted the value of its other digital holdings. At its peak in April 2022, Three Arrows held approximately $462 million worth of LUNA. This value plummeted to just over $2,700 by mid-May, following a massive selloff of TerraUSD.

Once a leading name in the crypto hedge fund industry, Three Arrows collapsed soon after LUNA’s downfall. A British Virgin Islands court appointed liquidators from the consulting firm Teneo to recover assets to repay the hedge fund’s creditors. This legal move against TerraForm is one of several actions the liquidators took, who are also pursuing claims against the fund’s founders, Su Zhu and Kyle Davies.

However, the outcome of this lawsuit remains uncertain, particularly regarding the potential recovery from TerraForm. Following the crash of his project, Do Kwon was arrested in Montenegro last year. He also faced charges in both the US and his country of origin — South Korea.

Read more: What Is Terra (LUNA)?

Recently, a Montenegro court ruled that Kwon should be extradited to South Korea. Yet, this decision has faced multiple delays.

The latest delay, reported on August 8, saw Montenegro’s Supreme Court postpone the extradition at the request of the country’s top prosecutor, Minister of Justice Andrej Milović. This postponement continues to extend the legal saga surrounding Kwon and TerraForm Labs.