According to Cointelegraph, the Avalanche Foundation is set to repurchase 1.97 million Avalanche (AVAX) tokens from the Luna Foundation Guard (LFG) for $45.5 million. These tokens, currently valued at $57.4 million in the market, were initially sold to LFG in April 2022, a month before the Terra blockchain ecosystem collapsed.
An Oct. 9 repurchase agreement and settlement filed in a Delaware Bankruptcy Court is now pending court approval, as stated by the Avalanche Foundation in an Oct. 11 X post. The foundation emphasized that this action ensures LFG would not violate the original agreement’s restrictions on the tokens’ use and shields the tokens from the complexity of a bankruptcy trustee liquidation while returning 1.97 million AVAX to the Foundation’s holdings.
The 1.97 million Avalanche tokens are now worth 42% less than the $100 million LFG paid for them back in April 2022. The settlement will reduce litigation costs and deplete fewer assets available to distribute to creditors, Terraform Labs noted in the filing. It will ensure that the firm will recover an amount close to the current market value of the 1.97 million AVAX tokens, Terraform Labs added. The settlement amount was derived based on the volume-weighted average price of AVAX tokens over seven days in early August 2024.
LFG is a nonprofit organization tasked with building and maintaining reserves for Terra’s algorithmic stablecoin TerraClassicUSD (USTC), which it used to purchase the AVAX haul. Less than a month later, USTC lost its peg with the United States dollar and fell as low as $0.006. Terraform Labs, the firm behind the layer 1 blockchain Terra, also swapped $100 million worth of Terra Luna Classic (LUNC) for AVAX to strategically align ecosystem incentives in April. Nearly $60 billion was wiped from LUNC and USTC’s market caps as a result of the collapse, according to CoinGecko data.
The repurchase agreement comes as a Delaware bankruptcy judge approved Terraform Labs’ move to wind down its operations last month following its $4.5 billion settlement with the Securities and Exchange Commission in June. Terraform reportedly suggested it could pay between $185 million and $442 million as part of its winding down plan, though its total losses were deemed impossible to estimate.
