On October 12, 2024, the Avalanche Foundation announced an agreement with Luna Foundation Guard (LFG) to repurchase 1.97 million AVAX tokens, which were initially sold to LFG in April 2022. This move aims to minimize risks associated with LFG’s involvement in the now-defunct LUNA-UST ecosystem.
The AVAX tokens were sold to LFG for $200 million to create a crypto reserve fund to support the LUNA-UST model. However, the LUNA-UST ecosystem collapsed just a month later, leading LFG to liquidate $3 billion in Bitcoin in an unsuccessful attempt to stabilize UST.
The Avalanche Foundation had been working to repurchase the AVAX tokens to prevent market destabilization but faced delays due to legal and procedural hurdles. With this new agreement, pending approval from a bankruptcy court, the Avalanche Foundation aims to prevent the sale of these tokens and avert further market disruption.
The news of the agreement resulted in a 9% increase in AVAX’s price on October 12.
In the meantime, Terraform Labs, the company behind LUNA and UST, declared bankruptcy in June 2024 after accepting a $4.47 billion fine from the U.S. SEC. Its founder, Do Kwon, is currently in custody in Montenegro, awaiting a decision on his extradition to either the U.S. or South Korea.
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