- The Avalanche Foundation intends to get back 1.97 million AVAX tokens to boost its ecosystem.
- The repurchase is intended to stabilize AVAX’s market by reducing circulating supply and reducing volatility.
The Avalanche Foundation has announced plans to buy back 1.97 million Avalanche (AVAX) tokens from the Luna Foundation Guard (LFG) for $45.5 million. This transaction occurs at a time when the tokens are worth around $57.4 million on the market. The repurchase is particularly relevant because these coins were originally sold to LFG in April 2022. This transaction occurred just one month before the collapse of the Terra blockchain ecosystem.
On October 9, an agreement for the acquisition and settlement was filed in a Delaware Bankruptcy Court. It is now awaiting court approval, as stated in an October 11 post by the Avalanche Foundation. The foundation stated that this action was intended to prevent LFG from violating the original agreement’s restrictions on token usage while additionally safeguarding the tokens from the challenges associated with bankruptcy trustee liquidation. By repurchasing the tokens, the foundation hopes to return the 1.97 million AVAX to its holdings.
Strengthening the Avalanche Ecosystem
The repurchased tokens are currently worth 42% less than the $100 million LFG paid for them in April 2022. The settlement will also help to reduce litigation costs and conserve assets for distribution to creditors, according to Terraform Lab’s application. The settlement amount is based on the volume-weighted average price of AVAX tokens. This price was calculated over a seven-day period in early August 2024.
LFG, a nonprofit corporation responsible for managing reserves for Terra’s algorithmic stablecoin, TerraClassicUSD (USTC), sold USTC. They used the proceeds from this sale to purchase AVAX tokens. However, shortly after the acquisition, USTC lost its peg to the US dollar and fell as low as $0.006. Terraform Labs, the company behind the Terra blockchain, also exchanged $100 million of Terra Luna Classic (LUNC) for AVAX in April 2022 to better match ecosystem incentives.
A Delaware bankruptcy judge recently approved Terraform Labs’ plan to wind down operations following a $4.5 billion settlement with the SEC in June. As part of this winding-down plan, Terraform has stated that it may pay between $185 million and $442 million. However, the company acknowledges that its overall losses are now unquantifiable. The repurchase agreement comes as Terraform navigates this complex process.
As of this writing, AVAX is trading at $29.29, with a decline of 0.01%. As the Avalanche Foundation awaits court clearance for the buyback, the crypto community is closely monitoring the situation, eager to see how this action would affect the market and the ecosystem as a whole.
