The Avalanche Foundation is set to repurchase 1.97 million Avalanche tokens it sold to the Luna Foundation Guard (LFG) in April 2022 a month before it’s Terra blockchain ecosystem collapsed.

The Avalanche Foundation to purchase the 1.97 million AVAX tokens for $45.5 million — which are worth $57.4 million in the market — from Terraform Labs’ bankruptcy estate.

An Oct. 9 repurchase agreement and settlement filed in a Delaware Bankrupcy Court is now pending court approval, the Avalanche Foundation said in an Oct. 11 X post.

“This action ensures that LFG would not violate the original agreement’s restrictions on the tokens’ use and shields the tokens from the complexity of a bankruptcy trustee liquidation, while returning 1.97M AVAX to the Foundation’s holdings,” said the foundation, which backs the layer 1 blockchain Avalanche.

The 1.97 million Avalanche tokens are now worth 42% less than the $100 million LFG paid for back in April 2022.

The settlement will reduce litigation costs and deplete fewer assets available to distribute to creditors, Terraform Labs said in the filing.

It will ensure that the firm will recover an amount close to the current market value of the 1.97 million AVAX Tokens, Terraform Labs added.

The settlement amount was derived based on the volume-weighted average price of AVAX tokens over a seven-day period in early August 2024.

LFG is a nonprofit organization that was tasked with building and maintaining reserves for Terra’s algorithmic stablecoin TerraClassicUSD (USTC), which it used to purchase the AVAX haul.

Less than a month later, USTC lost its peg with the United States dollar and fell as low as $0.006. 

Terraform Labs — the firm behind the layer 1 blockchain Terra — also swapped $100 million worth of Terra Luna Classic (LUNC) for AVAX  to “strategically align ecosystem incentives” in April.

Nearly $60 billion was wiped from LUNC and USTC’s market caps as a result of the collapse, CoinGecko data shows.

The repurchase agreement comes as a Delaware bankruptcy judge approved Terraform Labs’ move to wind down its operations last month following its $4.5 billion settlement with the Securities and Exchange Commission in June.