The Avalanche Foundation is set to repurchase 1.97 million Avalanche tokens (AVAX) that it sold to the Luna Foundation Guard (LFG) in April 2022, just before the collapse of Terra’s blockchain ecosystem.
The foundation will acquire the tokens for $45.5 million, which represents a significant discount from the $100 million LFG paid for them in 2022. The repurchase agreement, filed with the Delaware Bankruptcy Court, is pending approval.
Strategic Move to Reduce Litigation Costs
Terraform Labs, the company behind the Terra blockchain, has supported the repurchase agreement, stating that it will reduce litigation costs and deplete fewer assets available for distribution to creditors. The settlement amount was determined based on the volume-weighted average price of AVAX tokens over a seven-day period in early August 2024.
Context of the Collapse
The LFG purchased the AVAX tokens to build and maintain reserves for Terra’s algorithmic stablecoin, TerraClassicUSD (USTC). However, USTC lost its peg to the U.S. dollar and experienced a dramatic decline in value, leading to the collapse of the Terra ecosystem.
Also Read: Terraform Labs Issues Final Warning to Terra Classic Users – Act Now to Save Your LUNC and USTC
Terraform Labs’ Winding Down Plan
The repurchase agreement comes as Terraform Labs is in the process of winding down its operations. In June, the company reached a $4.5 billion settlement with the Securities and Exchange Commission. Despite the settlement, Terraform Labs’ total losses from the collapse remain difficult to estimate.
Overall, the Avalanche Foundation’s decision to repurchase the AVAX tokens is a strategic move to protect its assets and reduce its exposure to the complexities of Terraform Labs’ bankruptcy proceedings. The settlement also demonstrates the foundation’s commitment to preserving the value of the Avalanche ecosystem.
Disclaimer: The information in this article is for general purposes only and does not constitute financial advice. The author’s views are personal and may not reflect the views of Chain Affairs. Before making any investment decisions, you should always conduct your own research. Chain Affairs is not responsible for any financial losses.
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