Avalanche Foundation to Get Back Nearly 2M AVAX from Terra

The Avalanche Foundation plans to buy back its tokens from the Terra Foundation. In April 2022, Terraform Labs, through Luna Foundation Guard (LFG), purchased 1.97 million Avalanche (AVAX) tokens worth $100 million. Shortly after its purchase, the firm collapsed and announced its bankruptcy. 

According to an official announcement, the foundation is awaiting approval from the Bankruptcy Court. Earlier this month, Avalanche filed a repurchase agreement and settlement at the Delaware Bankruptcy Court. 

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.

This action ensures that LFG would not violate the original…

— Avalanche Foundation 🔺 (@AvalancheFDN) October 11, 2024

The legal team stated that this move would ensure that the LFG would not violate the tokens’ use and avoid complications while returning them to the Avalanche holdings. Interestingly, the 1.97 million tokens that were sold for $100 million will be bought back for $45.5 million, marking a 42% drastic fall. At the time of writing, the market value of the AVAX tokens is $57.4 million. 

Terraform Labs stated that the agreement would reduce litigation costs and deplete lesser assets for distribution to creditors. It also added that the firm would recover an amount closer to the market value of 1.97 million Avalanche tokens. The settlement amount was confirmed based on the volume-weighted average price of the tokens, taken over a week in early August 2024.  

The LFG is a non-profit organization used to build and maintain reserves for Terra’s stablecoin TerraClassicUSD (USTC). This stablecoin helped in the purchase of AVAX. In April 2022, Terraform Labs, the firm behind the Layer 1 blockchain Terra swapped $100 million Terra Luna Classic (LUNC) for AVAX, to strategically align ecosystem incentives. 

However, less than a month later, USTC lost its peg with the US Dollar and nearly $60 million was lost. The repurchase agreement is the latest move from the Terra Foundation following a $4.5B settlement with the SEC in June.

Following the announcement by Avalanche Foundation, the AVAX price surged by 7.5%. However, Terra Foundation’s future is bleak, signaling the challenges in restoring its value after its downfall.