Galaxy Digital, a digital assets investment firm founded by Michael Novogratz, has agreed to a $200 million settlement with the New York Attorney General’s Office (NYAG).
Per Axios, the settlement relates to alleged misconduct by Galaxy Digital, which is accused of heavily promoting the LUNA token before its catastrophic collapse in 2022.
LUNA, a cryptocurrency by the defunct Terraform Labs, saw a catastrophic implosion in May 2022.
The resulting contagion drove a major bear market, wiping billions of dollars off the market within days.
Several companies collapsed in the aftermath, and Terraform Labs founder Do Kwon went on the run before his arrest and eventual extradition to the United States.
Galaxy Digital settles with NYAG
Galaxy Digital is one of the companies to face legal troubles for its relationship with LUNA, an algorithmic cryptocurrency tied to the Terra ecosystem.
According to a filing, the company engaged in high-profile promotion of LUNA, but failed to disclose its substantial holdings and subsequent sales.
The altcoin skyrocketed in value, helped by Galaxy Digital’s marketing efforts.
Novogratz also recommended a user on Twitter (now X) buy Luna, with this being in reply to the individual’s asking for help on what tokens to purchase.
“On March 26, 2021, when Luna was trading around $18 per token, Novogratz posted on social media that he would get a Luna tattoo if Luna’s price reached $100. Luna hit $100.84 on December 24, 2021, and on January 4, 2022, Novogratz publicly unveiled his Luna tattoo on social media,” the NYAG stated in its filing.
By the time LUNA imploded to zero, the firm had exited nearly all of its positions – a fact that left retail at the mercy of the brutal implosion.
“Galaxy helped a little-known token achieve meteoric growth while profiting immensely, all without transparency,” the regulator continued.
Galaxy Digital allegedly made more than $100 million from its sale of LUNA tokens, having sold at the top while urging retail “to keep the faith” via posts on social media.
$200 million penalty, payable over three years
NYAG is settling with Galaxy Digital amid a wave of regulatory moves that have seen the US Securities and Exchange Commission end multiple crypto-related investigations.
The SEC has also withdrawn several court cases against leading companies in the space, including Coinbase, Kraken, and Ripple.
SEC’s latest such move is the ending of a probe into crypto exchange Crypto.com.
In relation to LUNA, the SEC settled for $123 million with a Jump Crypto subsidiary in 2024.
The regulator also agreed to a $4.7 billion settlement with Terraform Labs.
Under the terms of the settlement, Galaxy Digital will pay the $200 million penalty over three years, with an initial payment of $40 million due within two weeks.
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