Avalanche Foundation Announces 2M AVAX Buyback from Terra Transaction

• The Avalanche Foundation is set to repurchase 1.97 million AVAX tokens sold to the Luna Foundation Guard in 2022 for $45.5 million.
• The primary reason behind this buyback, according to the foundation is to mitigate potential legal risks.

The Avalanche Foundation has announced plans to repurchase 1.97 million AVAX tokens it previously sold to the Luna Foundation Guard in April 2022. It is worth mentioning, that this purchase happened a month before the great Terra Luna collapse.

The transaction, which originally saw Avalanche sell the tokens for $100 million, will now be reversed as the foundation repurchases them for $45.5 million.

The Avalanche Foundation has negotiated an agreement to repurchase all AVAX tokens previously sold to the Luna Foundation Guard (LFG) in April 2022, which is now awaiting approval from the Bankruptcy Court.

This action ensures that LFG would not violate the original…

— Avalanche Foundation 🔺 (@AvalancheFDN) October 11, 2024

As earlier mentioned, the original transaction between Avalanche and Terra occurred just before the catastrophic collapse of Terra’s ecosystem that wiped more than $40 billion out of the crypto markets.

Reminiscing, in May 2022, Terra’s algorithmic stablecoin USTC lost its peg to the U.S. dollar, leading to a cascade of market losses. The collapse wiped nearly $40 billion from the market capitalizations of both Terra Luna Classic.

At the time, the 1.97 million AVAX tokens were valued at $100 million, as they were purchased by the LFG, a nonprofit organization tasked with maintaining reserves for Terra’s algorithmic stablecoin TerraClassicUSD (USTC). However, following Terra’s collapse in May 2022, the value of these tokens plummeted, along with much of the cryptocurrency market.

With the recent development, the Avalanche Foundation will have a hard one to take as the repurchase agreement will see the foundation reacquire the tokens for $45.5 million, significantly lower than the original sale price.

This represents a 42% decrease in value compared to the $100 million price tag from 2022, even though the tokens are now worth approximately $57.4 million based on current market prices.

Via a post on the X platform, the team highlighted that the buyback is a strategic move to protect its interests and prevent further complications.

This action ensures that 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 1.97M AVAX to the Foundation’s holdings.

Worth noting is the primary reason behind this buyback, according to the foundation, the buyback is to mitigate potential legal risks. In essence, By reacquiring these tokens, the Foundation aims to prevent them from being entangled in the ongoing Terraform Labs liquidation proceedings.

This proactive measure protects AVAX tokens from potential bankruptcy sales and ensures they remain under Avalanche’s control, safeguarding their value within the ecosystem.”

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.

Meanwhile, at the time of writing, AVAX is currently changing wallets with $29.30 marking a 0.98% and 9% surge in the last 24 hours and past week respectively. Additionally, with a market cap of $11.01 billion, its 24-hour trading volume has surged by 17% stopping at $382.09M.