Avalanche Foundation Buys Back 1.97M AVAX Tokens From LFG

• Avalanche (AVAX) Foundation has successfully repurchased the 1.97 million AVAX tokens sold to the Luna Foundation Guard (LFG) in 2022.
• Data estimates that Avalanche purchased these tokens for $53 million at a current price of $26.78 per coin.

Avalanche Foundation has officially finalized the buyback of its 1.97 million AVAX tokens earlier acquired by Luna Foundation Guard (LFG). According to the report, the company spent $53 million at a current price of $23.95, which is higher than the $45.5 million stated in the filing.

The Avalanche Foundation successfully negotiated the repurchase of 1.97M AVAX tokens previously sold to Luna Foundation Guard (LFG) in 2022. 🔄https://t.co/VYhmnyT0EC— Avalanche Foundation 🔺 (@AvalancheFDN) November 4, 2024

The Background of the Story

Terraform Labs founder Do Kwon established the LFG in 2022 to protect its TerraUSD (UST) stablecoin. According to reports, LFG then acquired a chunk of Bitcoin and 100 million worth of AVAX ($16.7 billion at that time) to stabilize the stablecoin. In addition, $100 million worth of Terra (LUNA) tokens were swapped for AVAX to build a robust reserve.

In May 2022, the Terra ecosystem took a dramatic downturn as UST lost its dollar peg, sending the entire crypto market plummeting. Data estimates that almost $60 billion was eroded from LUNC and USTC’s market caps.

On October 12, the Avalanche Foundation began the process of repurchasing these tokens from LFG. According to them, this decision was part of the effort to lay a solid foundation for future initiatives. Based on our investigation, the acquired funds would be used to support important ecosystem projects, which include developer events, incubators, and grants.

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.

Meanwhile, an earlier report from Terraform establishes that the settlement would largely reduce litigation costs and subject the assets available for distributions to creditors to a significant depletion. According to the firm, the settlement amount was obtained from the volume-weighted average price of AVAX tokens in a period of seven days in August.

Rundown on the Terraform Case and Avalanche’s (AVAX) Price Reaction

Recently, Judge Brendan Shannon of the US Bankruptcy Court for the District of Delaware approved a bankruptcy plan submitted by Terraform. The Chapter 11 protection was filed in January, claiming $100 and $500 million in liabilities and assets.

In 2022, Kwon and the company were found liable for defrauding investors, with the court ordering them to pay $4.5 billion in fines and penalties. In a recent bankruptcy hearing, the company disclosed that it could only pay $185 million and $442 million.

Meanwhile, AVAX is steadily gathering momentum for a bullish run as it currently moves to become the 13th largest crypto by market cap. At press time, the asset was trading at $26.78 after surging by 5% in the last seven days and 22% in the last 90 days. However, its trading volume remains 18% down with $467 million changing hands at press time.

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