Galaxy Digital has settled with the New York Attorney General (NYAG) for $200 million regarding allegations that the cryptocurrency investment firm promoted the now-defunct Luna digital asset without adequately disclosing its financial interest in the token.
A filing from the NYAG accuses Galaxy of violating the Martin Act and Executive Law due to its involvement in Luna’s collapse. The firm reportedly acquired 18.5 million Luna tokens at a 30% discount before promoting and selling them without appropriate disclosures.
Luna was developed by Terraform Labs to support the TerraUSD stablecoin’s peg to the US dollar through an automated buying and selling mechanism. However, in 2022, a major sell-off by a significant TerraUSD holder triggered market panic, leading to the minting of Luna tokens to buy back the stablecoin and resulting in a dramatic drop in Luna’s price.
Last year, Terraform Labs and its former CEO, Do Kwon, reached a $4.5 billion settlement with the SEC following the eventual $40 billion collapse of the company and its ecosystem. The downfall of Terra also initiated a cascade of issues within the crypto industry, contributing to the failure of crypto hedge fund Three Arrows Capital, which subsequently affected Genesis Global Capital and FTX.
While Galaxy and its CEO, Mike Novogratz, were publicly endorsing Luna—Novogratz even pledged on social media to get a tattoo if the token broke $100—the company was simultaneously selling off its holdings. The settlement states: “While Novogratz posted pictures of his tattoo and expressed his bullishness on Luna to the public, Galaxy sold millions of tokens into the market at many multiples of its initial cost without disclosing that it was selling.”
Ultimately, the settlement notes that Galaxy played a significant role in raising the market price of Luna from $0.31 in October 2020 to $119.18 in April 2022, profiting hundreds of millions of dollars in the process.