Originally published on: October 14, 2024
The Avalanche Foundation has announced its plans to repurchase 1.97 million Avalanche tokens that were originally sold to the Luna Foundation Guard (LFG) back in April 2022, just a month before the collapse of the Terra blockchain ecosystem.
In an effort to regain control of these tokens, the foundation will be acquiring the 1.97 million AVAX tokens from Terraform Labs’ bankruptcy estate for $45.5 million, a significant discount from their current market value of $57.4 million. This decision comes after an Oct. 9 repurchase agreement and settlement were filed in a Delaware Bankruptcy Court, pending court approval as of the Avalanche Foundation’s announcement on Oct. 11.
By reclaiming these tokens, the foundation aims to ensure that the original agreement’s restrictions on their use are upheld and shield the tokens from potential complications arising from a bankruptcy trustee liquidation. This strategic move will not only safeguard the tokens but also restore 1.97 million AVAX tokens back to the Foundation’s holdings, strengthening its position in supporting the layer 1 blockchain Avalanche.
Following the collapse of the Terra ecosystem, the 1.97 million Avalanche tokens are now valued at 42% less than the $100 million originally paid by LFG in April 2022. The settlement between the parties will help reduce litigation costs and preserve more assets for distribution to creditors, as stated in Terraform Labs’ filing.
The settlement amount was determined based on the volume-weighted average price of AVAX tokens over a seven-day period in early August 2024, ensuring a fair agreement for both parties involved.
As the proceedings move forward, this buyback initiative marks a significant step in the ongoing wind-down of Terraform Labs operations following its settlement with the Securities and Exchange Commission in June. Despite the challenges faced by Terraform Labs, the Avalanche Foundation’s decision to repurchase the AVAX tokens signals a positive development in the aftermath of the Terra ecosystem collapse.
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