Galaxy Digital, a prominent crypto firm, faces a $200 million settlement imposed by the New York Attorney General. This settlement follows the collapse of LUNA and its stablecoin, TerraUSD, in a dramatic market crash. The settlement was reached after a detailed filing by New York authorities on March 24.
Allegations and Details
LUNA wiped out at least $40 billion in wealth during the Terra crash two years ago. The New York Attorney General’s filing accuses Galaxy Digital of breaking the Martin Act and the Executive Law.
Galaxy promoted LUNA without revealing its interest in the asset during critical periods. The firm sold millions of tokens at high multiples without disclosing its transactions publicly. Michael Novogratz, the CEO, promoted the asset while privately selling tokens for huge profits.
The filing states that Galaxy entered a deal with Terraform Labs to buy 18.5 million tokens at a 30 percent discount. Galaxy received the tokens in monthly tranches over one year, and it sold most of them as prices soared.
The firm made over $100 million by March 2022, exiting almost completely from its LUNA position. Despite public endorsements, Galaxy did not reveal its significant sales while urging investors to buy the asset.
Promotion and Public Statements
Michael Novogratz became a chief booster of LUNA during its rise in value. He even promised to get a tattoo if LUNA broke the $100 mark on social media. When the target was hit, he displayed a wolf tattoo symbolizing his bullish stance.
The settlement filing alleges that while Novogratz shared his excitement, Galaxy secretly sold tokens at high profits. This behavior shows a clear conflict of interest that misled many retail investors.
The asset’s surge led to fervent support from fans who called themselves “lunatics.” However, market conditions soon shifted, and the value plummeted as doubts about its stability grew.
Also Read: Terraform Labs’ Do Kwon Faces Delayed Trial, Defense Needs More Time to Review Evidence
Settlement and Its Implications
The settlement outlines that Galaxy Digital must pay the agreed sum over three years, with the first installment of $40 million due soon.
In addition to the monetary penalty, the firm has agreed to implement policies to avoid future conflicts of interest.
Galaxy must now conduct legal reviews of all token-related deals and change its promotional practices.
This agreement neither admits nor denies the allegations made by the New York Attorney General’s office. Galaxy Digital awaits further clarification as it prepares to report its full-year results later this week.
Legal and Market Reactions
The settlement comes after a series of similar actions against firms related to LUNA. Last year, the SEC settled with a subsidiary of Jump Crypto for $123 million on similar issues.
Moreover, Terraform Labs settled for $4.7 billion with its creators over the collapse. The legal battles have significantly altered the landscape of crypto investments and market trust. Recently, the Supreme Court of South Korea also ruled that Terra Luna is not a financial investment product under existing laws.
The settlement against Galaxy Digital marks a turning point for crypto market regulations and investor protections. It sets clear expectations for transparency and fair practices in digital asset promotions.