The Avalanche Foundation has finalized its disentanglement from the collapsed Terra ecosystem, repurchasing $52 million worth of $AVAX tokens from Do Kwon’s now-defunct Luna Foundation Guard (LFG). This marks the end of a relationship that began over two years ago and ultimately resulted in significant losses for many involved with Terra.
In 2022, Do Kwon, creator of Terraform Labs, launched LFG as a mechanism to acquire $10 billion in Bitcoin and other crypto assets, including AVAX, to serve as a reserve for the then-popular algorithmic stablecoin TerraUSD (UST). The strategy involved two deals: LFG acquired $100 million in AVAX, while the Avalanche Foundation received $200 million in UST and its associated token, $LUNA . UST was designed to maintain its peg to the US dollar through a mechanism that burned or bought LUNA, which had a fluctuating market price.
Intended to “strategically align incentives” between the two blockchain ecosystems, the partnership ultimately backfired for Avalanche, mirroring the fate of many entities connected to Terra. Following the collapse of UST, the Avalanche Foundation has been working to buy back its AVAX tokens.
Recently granted permission by the bankruptcy court, the non-profit organization has successfully repurchased 1.97 million AVAX tokens, currently valued at approximately $52 million.
Aytunç Yildizli, CEO and executive director of the Avalanche Foundation, stated, “We’re pleased to finalize this repurchase, which underscores our ongoing commitment to the development of the Avalanche ecosystem.” He added that the repurchased funds will be allocated to grants, incubators, and events designed to foster community and technological growth.
An Avalanche spokesperson reinforced this commitment, telling that the token buyback represents “an important step in [the foundation’s] ongoing efforts to support the growth and sustainability of the Avalanche ecosystem.”
