Avalanche said in a series of posts on May 20 that the Luna Foundation Guard (LFG) – the organization tasked with safeguarding the dollar peg of UST – has not disclosed any plans for the 2 million AVAX tokens currently sitting in its treasury.
Until the crash, the Luna Foundation Guard appeared to have sold off all the assets in its treasury to save the UST, which included $3 billion in Bitcoin, 26 million USDT, and 23 million USDC. The LFG stated that the meager amount remaining would be used to compensate UST users, prioritizing the holders of the smallest amount first.
During the entire effort to save UST, LFG has disclosed no plans to use the AVAX. As a result, the Avalanche team was forced to provide an update as most members of the Avalanche community were concerned that LFG’s plans for AVAX would not work.
To compensate users, it is highly likely that LFG will dump AVAX. In addition, Avalanche revealed Terraform Labs (TFL) is holding 1.1 million AVAX for a one-year lockup. The AVAX tokens held by TFL and LFG represented 0.5% and 0.9% of the token’s weekly volume, according to Avalanche.
As reported by CoinDesk, about a month before the collapse of LUNA-UST, both Terraform Labs (TFL) and Luna Foundation Guard purchased $200 million worth of Avalanche’s AVAX tokens from the Avalanche Foundation. In return, the Avalanche Foundation received $100 million worth of LUNA from Terraform Labs and $100 million worth of the stablecoin UST from Luna Foundation Guard. However, Avalanche did not address the status of the Avalanche Foundation’s Terra-related tokens. An Avalanche spokesperson also did not respond to a request for comment.
The announcement comes as organizations with close ties to the Terra ecosystem are facing demands for transparency from the community due to the collapse last week. The collapse even faced legal issues. Do Kwon was summoned by South Korea’s parliament, investors are also preparing the final procedures to sue him. Moreover, because the damage of this collapse was too serious, a special financial crime investigation unit named Death Yeouido has been revived after 2.5 years to investigate Do Kwon’s company. Terra’s legal team was also reported to have left their positions briefly after the infamous UST crash.
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