Galaxy Digital settles for $200M over LUNA promotion violations

Galaxy Digital, a crypto investment firm led by Michael Novogratz, has agreed to pay $200 million to settle allegations brought by the New York Attorney General (NYAG) regarding its promotion of the cryptocurrency LUNA.

The settlement addresses claims that Galaxy Digital violated New York laws by failing to disclose its financial interests while publicly endorsing the token.

Between 2020 and 2022, Galaxy Digital acquired 18.5 million LUNA tokens at a 30% discount from Terraform Labs.

The firm then promoted LUNA extensively, contributing to its price surge from $0.31 in October 2020 to $119.18 in April 2022.

However, Galaxy allegedly sold its holdings for hundreds of millions in profit without informing investors of its intent to sell or its financial stake in the asset.

This lack of transparency is said to have misled investors, particularly as LUNA collapsed in May 2022, erasing $60 billion in market value.

The NYAG accused Galaxy Digital of violating disclosure rules under the Martin Act and Executive Law.

“Today’s settlement sends a clear message that we will not tolerate unregistered securities sales in New York,” Attorney General Letitia James stated.

Under the settlement terms, Galaxy Digital will pay $200 million over three years, with the first $40 million due within 15 days of the agreement’s execution on March 24.

The firm has also committed to implementing stricter policies to prevent conflicts of interest and ensure compliance with disclosure regulations.

While Galaxy Digital did not admit wrongdoing, the settlement highlights ongoing regulatory scrutiny in the cryptocurrency industry.

The NYAG noted that Galaxy’s actions played a significant role in LUNA’s rise and subsequent collapse, which left many investors financially devastated.