Avalanche Foundation Strengthens Its Position for the Future

This decision comes after Terra's downfall when the value of the tokens dramatically dropped. Let's break down what happened.

Avalanche Foundation is buying back 1.97 million AVAX tokens from the bankrupt Luna Foundation Guard (LFG) for $45.5 million, a move that will help protect the foundation’s interests and prevent the tokens from being misused.

The tokens were part of a $100 million treasury swap between Avalanche and Terra in April 2022, which saw LFG purchase the tokens to support its algorithmic stablecoin, TerraClassicUSD (USTC).

However, USTC lost almost all of its value in May 2022, dropping to as low as $0.006. This collapse wiped out nearly $60 billion from the market, leading to the bankruptcy of Terraform Labs, the company behind Terra.

The Avalanche Foundation said in a recent social media post that the buyback is crucial for maintaining the integrity of the agreement they had with LFG.

“This action ensures that LFG would not violate the original agreement with the Foundation by keeping the tokens and using them in a manner that is inconsistent with the parties’ original intent,” the foundation wrote.

The foundation also noted that the tokens were never intended to be a part of the bankruptcy estate, and that keeping them out of the process will help to protect the foundation’s interests and avoid costly legal battles.

“The parties agreed that the tokens were not included in the bankruptcy estate and that the Foundation would promptly take steps to recover the tokens,” the foundation added.

A judge recently approved Terraform Labs’ plan to wind down its operations, following a huge settlement with the SEC. The company is now bankrupt and is trying to sell off its remaining assets as quickly as possible.