The Avalanche Foundation has taken an important step to support the Terra blockchain ecosystem by repurchasing 1.97 million AVAX tokens previously purchased by LFG. In the statement, it was stated that the Avalanche Foundation completed this buyback process and the tokens were transferred back to the foundation.
Avalanche Foundation made a coin buyback
Founded in 2022 by Terraform Labs founder Do Kwon, LFG created a reserve fund to support the TerraUSD (UST) stable coin. In this context, AVAX tokens worth $100 million were purchased and UST’s reserve was strengthened along with Bitcoin (BTC) and other altcoins. However, with the collapse of the Terra ecosystem and the loss of UST’s dollar index, these reserve plans of LFG also failed. Avalanche Foundation, which took action to buy back AVAX tokens, has finally completed the process.
While the Avalanche Foundation committed to pay $45.5 million for the repurchase of the tokens in question, the market price of AVAX was at $26.95 when the transaction was completed. In this case, 1.97 million tokens would be worth approximately $53 million. This agreement for the buyback process ensured that the agreements between the foundation and LFG were adhered to, while also aiming to secure the tokens without being involved in a complex bankruptcy process.
In its statement, the Avalanche Foundation emphasized that this buyback is a critical move to contribute to the sustainability of their ecosystems. The Foundation stated that these tokens will be used in support projects and stated that it set out with the aim of strengthening initiatives such as various events, grants and incubation programs.
Terra ecosystem collapse: What happened?
In 2022, LFG made large-scale token purchases in order for TerraUSD to maintain its dollar peg. In this context, LFG planned to support the Terra ecosystem with reserves such as Bitcoin and AVAX. However, in May 2022, UST lost its dollar peg, causing a chain collapse in the Terra ecosystem. As the value of UST and LUNA dropped significantly, this meant heavy losses for investors and LFG’s token reserves.
The $100 million AVAX held by LFG had not returned to the foundation since Terra’s collapse and remained at risk of sale. However, the Avalanche Foundation’s agreement with LFG secured these tokens and allowed the tokens to be directed to the foundation’s own initiatives. Avalanche Foundation plans to strategically use these tokens bought back from LFG to sustain and support their ecosystem. The foundation announced that it will use these tokens for community development, research projects, innovation-focused grants and financial support for new projects.
