The Avalanche Foundation has successfully reclaimed 1.97 million AVAX tokens initially acquired by the Luna Foundation Guard (LFG) to strengthen the Terra blockchain ecosystem.
Strategic Buyback to Prevent Liquidation Issues
Avalanche described the buyback as a necessary step to honor original agreements and prevent complications in case of bankruptcy liquidation. The initiative supports the foundation’s objective of safeguarding the AVAX tokens from potential risks associated with LFG’s dissolution.
AVAX Tokens Gain Value Amid Market Momentum
At the initial purchase, these tokens were valued at around $45.5 million. Currently, the market price has pushed their worth to approximately $53 million. This move enables the Avalanche Foundation to uphold the intended restrictions for the tokens, ensuring their proper use within the ecosystem.
Supporting the Avalanche Ecosystem with Reclaimed Tokens
The reclaimed AVAX tokens will help fuel Avalanche’s growth through various initiatives, including grants, events, and incubation programs. This approach will foster innovation and engagement within the Avalanche community.
The Background: Luna Foundation Guard’s Initial Purchase
The Luna Foundation Guard, founded in 2022 by Terraform Labs’ Do Kwon, aimed to stabilize Terra’s algorithmic stablecoin, UST. To achieve this, LFG acquired reserves of Bitcoin and AVAX, including a $100 million AVAX allocation. Additionally, Terraform Labs exchanged $100 million worth of Terra (LUNA) tokens for AVAX, aligning the two ecosystems.
Terra’s Collapse and the AVAX Token Reclamation
Following the collapse of Terra in May 2022, which triggered a steep decline in LUNA’s value, the Avalanche Foundation initiated efforts to reclaim its tokens. By October 12, an agreement was finalized, allowing Avalanche to repurchase the AVAX tokens from LFG. The repurchase price was based on AVAX’s average trading price over seven days in early August 2024.
Legal Developments: Judge Approves $4.5 Billion Settlement with Terraform Labs
In July, U.S. District Court Judge Jed Rakoff approved a $4.5 billion settlement requiring Terraform Labs and Do Kwon to pay significant penalties. This agreement includes a permanent ban on both parties from participating in crypto asset securities transactions. Initially, the SEC had recommended a $5.3 billion fine, which Terraform Labs contested, leading to a final settlement of $4.5 billion.
Terraform Labs’ Bankruptcy and Financial Struggles
Under Chapter 11 bankruptcy protection, Terraform Labs now faces substantial financial obligations. According to testimony from CEO Chris Amani, the company has roughly $150 million in assets, posing challenges as it works to meet the settlement terms
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