The founders of Three Arrows Capital are being targeted by liquidators for the bankrupt cryptocurrency hedge fund for the recovery of $1.3 billion, the amount they allegedly racked up in losses prior to last year's collapse of the firm, according to a report by Reuters.

The founders of Three Arrows Capital (3AC) are being targeted by liquidators for the bankrupt cryptocurrency hedge fund for the recovery of $1.3 billion, the amount the allegedly racked up in losses prior to last year's collapse of the firm, according to a report by Reuters.

The report cites an unnamed source familiar with the matter as conforming that the liquidators discussed the allegations against co-founders Su Zhu and Kyle Davies at a meeting with the hedge fund's creditors on Tuesday.

The pair have been accused of causing 3AC to take on significant leverage between May and June 2022 following big losses on Luna tokens and other investments.

The liquidators allege that at that point, the firm was already insolvent and are now taking action to recover the losses in a British Virgin Islands court.