The Avalanche Foundation is set to repurchase almost 2 million Avalanche tokens sold to Luna Foundation Guard (LFG), an affiliate of Terra in 2022. Notably, the purchase is being made from Terraform Lab’s bankruptcy estate, which acquired the tokens before Terra’s financial amendments. The proposed buyback is valued at $45.5 million, despite the current market listing of the tokens around $57.4 million.
This strategic move is intended to reinstate the 1.97 million Avalanche tokens into the Avalanche Foundation’s holdings, despite the loss on their initial $100 million buy. The Avalanche Foundation espouses the Avalanche blockchain, a high-speed, secure layer 1 technology.
Moreover, the Foundation indicated that such a move would retain the original constraints of the token’s use within the LFG framework and escape the complications associated with bankruptcy trustee liquidation. Terraform Labs also affirmed that the settlement would economize on litigation expenses and conserve assets for potential redeployment to creditors.
The settlement sum was calculated using the seven-day volume-weighted average price of the AVAX tokens in early August 2024. After the purchase of the AVAX tokens, the Terra platform plunged with its algorithmic stablecoin, TerraClassicUSD (USTC), falling drastically from its USD peg.
Terraform Labs, another entity backing the Terra blockchain, also converted $100 million of the Terra Luna Classic (LUNC) into AVAX for strategic interest alignments. As a result of Terra’s collapse, CoinGecko data reveals a notable $60 billion drop in market caps for both USTC and LUNC.
Amidst these changes, a Delaware bankruptcy judge approved Terraform Labs’ decision to shut down operations. The approval came in the wake of a massive $4.5 billion settlement with the Securities and Exchange Commission. Terraform Labs’ total losses from this debacle remain challenging to estimate.