The current value of AVAX tokens is 42% lower than the $100 million the Luna Foundation Guard (LFG) originally paid for them.
Avalanche Foundation to Buy Back 1.97M Tokens Sold to Luna Before Terra’s Collapse
- The Avalanche Foundation has announced plans to repurchase 1.97 million AVAX tokens that were sold to the Luna Foundation Guard (LFG) in April 2022, just a month before the collapse of the Terra blockchain ecosystem. The buyback will cost $45.5 million, though the current market value of the tokens is $57.4 million.
- This move is part of a settlement filed in Delaware Bankruptcy Court on October 9, with court approval still pending. According to an October 11 post by the foundation on X, the repurchase aims to prevent future complications, ensuring LFG does not violate the original terms of the token sale and protecting the tokens from issues that could arise if they were liquidated by a bankruptcy trustee. The deal will bring 1.97 million AVAX tokens back into the Avalanche Foundation’s holdings.
- Although AVAX’s price has dropped 42% since LFG purchased the tokens for $100 million in April 2022, Terraform Labs—the company behind Terra—said the settlement will lower litigation costs and preserve assets for creditors. The settlement price was based on the volume-weighted average price of AVAX over a seven-day period in early August 2024.
- LFG initially bought AVAX to support reserves for TerraClassicUSD (USTC), an algorithmic stablecoin that later lost its peg to the U.S. dollar, falling to $0.006. Terraform Labs also swapped $100 million worth of Terra Luna Classic (LUNC) for AVAX in April 2022 to align ecosystem incentives. Following Terra’s collapse, nearly $60 billion was wiped from the market value of LUNC and USTC.
Terraform Labs and Do Kwon Face $4.5 Billion Settlement
- In July, U.S. District Court Judge Jed Rakoff approved a $4.5 billion settlement requiring Terraform Labs and its founder, Do Kwon, to pay disgorgement and civil penalties. They are also permanently banned from engaging in transactions involving “crypto asset securities,” including Terra ecosystem tokens. The settlement, a reduction from the SEC’s initial $5.3 billion proposal, was reached after negotiations, with Kwon and Terraform Labs agreeing to the revised amount in June.
- Do Kwon, currently detained in Montenegro and awaiting a decision on extradition, did not attend the trial. Terraform Labs, which is operating under Chapter 11 bankruptcy protection, faces the challenge of meeting the settlement’s financial obligations. According to testimony from CEO Chris Amani, the company has around $150 million in assets.
