Avalanche Foundation Cuts Ties with Terra Labs, Reclaims $52M

The Avalanche Foundation has officially withdrawn its support from the failed Terra LUNA blockchain after being engaged with it for more than two years. The foundation has also completed the repurchase of AVAX tokens from the Luna Foundation Guard, a step that enabled it to contain the risks from the catastrophic failure of the TerraUSD (UST).

Kwon is the founder of the Luna Foundation Guard (LFG) which was set up in 2022 as a tactical measure to support the stability of Terra’s UST. To bring this plan to fruition, LFG proposed a strategy in which a considerable amount of all assets, such as Bitcoin and AVAX, would be secured. This reserve would be to sell or buy UST to control the pegging of UST to the US dollar. However, this ambitious strategy ultimately backfired, which resulted in the dreadful collapse of the Terra ecosystem.

Avalanche Foundation Repurchases AVAX Tokens After Terra Collapse

In the course of stabilizing the Terra ecosystem in the broader context, the Avalanche Foundation and LFG undertook an ambitious token swap. LFG received $100 million in AVAX from the Avalanche Foundation, and the latter in return obtained $200 million in UST and LUNA tokens. The intention was to use the LUNA’s price fluctuations to sustain UST’s to $1. This mechanism included burning or minting LUNA to respond to the trends within the UST market.

Avalanche and Terra were meant to help each disassociate with adverse effects to its ecosystem, through a strategic partnership that they had established. Terra’s downfall, however, brought Avalanche down with it. The revival efforts of the Avalanche Foundation include repurchasing the tokens which the company has recently been doing.

The Avalanche Foundation has recently received the green light from the court allowing it to buy back 1.97 million AVAX tokens with a value of around $52 million to remedy or to lessen the effects of the Terra crisis.

“We’re pleased to finalize this repurchase, which underscores our ongoing commitment to the development of the Avalanche ecosystem,” said Aytunç Yildizli, CEO and executive director of the Avalanche Foundation. The funds will be allocated to support initiatives like grants, incubators, and events, fostering community and technological advancements.

Advertisement Banner

Do Kwon and Terraform Labs Fined Billions in SEC Settlement

The man behind the failed Terra stablecoin, Do Kwon, and his company, Terraform Labs, were brought to justice. The settlement of $4.47 billion with the U.S. Securities and Exchange Commission (SEC) came in June 2024 A jury earlier found them guilty of running a fraud scheme.

In 2022, the cryptocurrency market crumbled beneath them as TerraUSD collapsed, setting off a chain reaction that would eventually consume several leading companies such as Three Arrows Capital and Celsius or FTX.

While Kwon is still locked up in Montenegro, he’s facing more legal drama back home. The United States and South Korea have both requested his extradition.

Bottomline

The TerraUSD crash teaches a lesson to the crypto world. As the market grows, we need to keep in mind the dangers of cutting-edge tech. The Avalanche Foundation’s move to cut ties with the failed project shows how important it is to choose partners and handle risks well. At the same time, the legal trouble Do Kwon faces proves we need more honesty and responsibility in crypto. As the field gets older, we must find a way to balance new ideas with rules to keep the system healthy for years to come. Always do your research and stay ahead of the curve.

TheBITJournal is available around the clock, providing you with updated information about the state of the crypto world. Follow us on Twitter and LinkedIn, and join our Telegram channel.