Just before the Terra blockchain collapsed in April 2022, the Avalanche Foundation is strategically buying back 1.97 million AVAX tokens it issued to Luna Foundation Guard (LFG). Originally valued at $100 million, the tokens will be bought back by the Avalanche Foundation for $45.5 million, a 42% reduction from their original worth.
Approval of the buyback agreement—which the Delaware bankruptcy court filed in early October—is presently under review. According to the Avalanche Foundation, this move will ensure LFG’s adherence to the original conditions of the token sale and protect the tokens from the complex liquidation procedure sometimes accompanying bankruptcy processes.
Through buy-back, the Avalanche Foundation is shielding the tokens from possible market damage during Terraform Labs’ bankruptcy process. With the AVAX tokens valued at $57.4 million right now, the foundation will safeguard them for far less than their present value, therefore perhaps saving up to $12 million.
The Avalanche Foundation has negotiated an agreement to repurchase all AVAX tokens previously sold to the Luna Foundation Guard (LFG) in April 2022, which is now awaiting approval from the Bankruptcy Court.
— Avalanche Foundation 🔺 (@AvalancheFDN) October 11, 2024
This action ensures that LFG would not violate the original…
Following the fall of TerraClassicUSD (USTC) in 2022, Terraform Labs—the developer of the Terra blockchain—file for bankruptcy. LFG bought the AVAX tokens to support USTC’s reserves, which lost its peg to the US dollar soon after the purchase, therefore devaluating the value of the stablecoin to a fraction of a penny. This disastrous collapse affected Terra’s native tokens as well as its ecosystem and erased around $60 billion from the market.
Apart from supporting Avalanche, the buyback deal should save legal expenses and protect more assets for creditors of Terraform Labs. Early August 2024’s average market value of AVAX over a seven-day period allowed us to determine the settlement price.
As things develop, aficionados for cryptocurrencies are attentively observing to see how this agreement would shape the Avalanche blockchain going forward. The action shows a significant dedication by the foundation to preserve stability and assist the ecosystem even in the middle of market volatility and the continuous Terra disaster.
Although Avalanche sees this buyback as a good development, Terraform Labs is still coping with consequences from its demise and a court-approved wind-down strategy is now under progress. The company has large overall financial losses and unknown eventual payments to creditors. But in a market still grieving from Terra’s collapse, this agreement provides a sliver of consistency.
