The Avalanche Foundation has taken an important step by buying back 1.97 million AVAX tokens previously purchased by LFG to support the Terra blockchain ecosystem. The statement said that the Avalanche Foundation has completed this buyback process and the tokens have been transferred back to the foundation.
The Avalanche Foundation has bought back coins
Founded in 2022 by Terraform Labs founder Do Kwon, LFG created a reserve fund to support the TerraUSD (UST) stablecoin. In this context, 100 million dollars worth of AVAX tokens were purchased, strengthening the UST reserve along with Bitcoin (BTC) and other altcoins. However, with the collapse of the Terra ecosystem and UST losing its dollar index, LFG’s reserve plans also failed. The Avalanche Foundation, which took action to buy back the AVAX tokens, has finally completed the process.
The Avalanche Foundation committed to pay $45.5 million for the repurchase of the tokens in question, while the market price of AVAX was at $26.95 when the transaction was completed. In this case, 1.97 million tokens would reach a value of approximately $53 million. This agreement for the repurchase process aimed to ensure that the agreements between the foundation and LFG were adhered to, while also securing the tokens without being involved in a complex bankruptcy process.
In its statement, the Avalanche Foundation emphasized that this repurchase was a critical move to contribute to the sustainability of their ecosystem. The foundation stated that these tokens would 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 to maintain the dollar peg of TerraUSD. In this context, LFG planned to support the Terra ecosystem with reserves such as Bitcoin and AVAX. However, the loss of UST’s dollar peg in May 2022 caused a chain reaction of collapse in the Terra ecosystem. The value of UST and LUNA dropped significantly, which meant heavy losses for investors and LFG’s token reserves.
LFG’s $100 million AVAX has not been returned to the foundation since Terra’s collapse and continues to be at risk of being sold. However, the Avalanche Foundation’s agreement with LFG has ensured that these tokens are secured and allowed for the foundation to channel them to its own initiatives. The Avalanche Foundation plans to strategically use these tokens reclaimed 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.
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