Avalanche Foundation to Repurchase Nearly 2M AVAX Tokens Sold to Terra in 2022

The Avalanche Foundation has announced plans to repurchase 1.97 million AVAX tokens, sold to the Luna Foundation Guard (LFG) in April 2022, for $45.5 million. This move comes after the collapse of Terra’s blockchain ecosystem just a month after the initial sale. While the tokens are currently worth $57.4 million, the foundation aims to secure them from Terraform Labs’ bankruptcy estate as part of a settlement agreement.

The repurchase agreement, which was filed in Delaware Bankruptcy Court on October 9, is still awaiting court approval. The Avalanche Foundation shared the development in an October 11 post on X (formerly Twitter). The deal is intended to protect the tokens from the complexities of a liquidation by a bankruptcy trustee and to ensure LFG doesn’t breach the initial agreement’s terms regarding their usage.

Back in April 2022, LFG had paid $100 million for the 1.97 million AVAX tokens, but their value has since dropped by 42%. Despite the devaluation, the settlement aims to minimize litigation costs and recover as much of the current market value of the AVAX tokens as possible for Terraform Labs.

The settlement price was calculated based on the volume-weighted average price of AVAX over a seven-day period in early August 2024. This agreement comes in the wake of LFG’s involvement in supporting Terra’s algorithmic stablecoin TerraClassicUSD (USTC), which lost its peg to the U.S. dollar shortly after the purchase, leading to massive losses.

The collapse of Terra wiped nearly $60 billion from the combined market caps of LUNC and USTC, according to CoinGecko data. Terraform Labs, now in the process of winding down operations, has suggested it may pay between $185 million and $442 million as part of its bankruptcy settlement, although total losses remain difficult to quantify.

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