Daniel Walker
The Avalanche Foundation has officially concluded its association with the now-defunct blockchain Terra, announcing on Thursday the completion of its AVAX token buyback from the Luna Foundation Guard (LFG). LFG, created by Terraโs founder Do Kwon, was initially established to shield Terraโs algorithmic stablecoin TerraUSD (UST) from a catastrophic collapse, though the asset ultimately fell into a โdeath spiralโ in 2022.
In early 2022, Kwon launched LFG, intended to purchase $10 billion in Bitcoin and other assets like AVAX to bolster USTโs stability. As part of this plan, LFG acquired $100 million in AVAX, while the foundation held $200 million in UST and LUNA on its balance sheet. TerraUSDโs peg to the U.S. dollar, maintained through a burn-and-mint system with LUNA, was meant to align Avalancheโs and Terraโs ecosystems strategically.
Yet, following USTโs collapse, the foundation began efforts to reclaim its AVAX tokens. Recent approval from bankruptcy court allowed Avalanche to finalize the repurchase of 1.97 million tokens, valued at approximately $52 million at current prices.
CEO and Executive Director of the Avalanche Foundation, Aytunรง Yildizli, expressed satisfaction with the repurchase, noting, โWeโre pleased to finalize this repurchase, underscoring our commitment to Avalancheโs development.โ Funds from the buyback are allocated to support grants, incubators, and events that will foster community growth and technological advancements within the Avalanche ecosystem.
Legal Repercussions and Market Impact of Terra’s Collapse
Following Terraโs collapse, Do Kwon and Terraform Labs agreed to a civil settlement of $4.47 billion with the U.S. Securities and Exchange Commission in June 2024. TerraUSDโs implosion in 2022 triggered a market downturn, leading to the downfall of firms like Three Arrows Capital, Celsius, and FTX. Kwon has since been detained in Montenegro, facing extradition requests from both the U.S. and South Korea.
This repurchase marks a significant step forward for the foundation, reinforcing its dedication to a robust, Terra-free future.
