Galaxy Digital Reaches $200 Million Settlement with New York Attorney General's Office - Focus on Allegations of Misleading in LUNA Token

Galaxy Digital Reaches $200 Million Settlement with New York Attorney General's Office - Focus on Allegations of Misleading in LUNA Token

Galaxy Digital Reaches $200 Million Settlement with New York Attorney General's Office

Galaxy Digital, the digital asset investment firm founded by Michael Novogratz, has agreed to a $200 million settlement with the New York Attorney General's Office (NYAG). This settlement relates to alleged misconduct surrounding the promotion of the LUNA token before its catastrophic collapse in 2022.

LUNA, a cryptocurrency owned by the bankrupt company Terraform Labs, experienced a dramatic decline in May 2022. This incident resulted in a significant bear market that was able to drain billions of dollars from the market in just a few days. As a result, several companies collapsed and Terraform Labs founder Do Kwon fled before being arrested and eventually extradited to the United States.

Galaxy Digital's Legal Issues

Galaxy Digital is under pressure due to its close relationship with LUNA and associated promotions. According to a filing, the company engaged in extensive promotion of LUNA without disclosing its significant inventory and subsequent sales activities. Galaxy Digital's marketing efforts saw the altcoin's value increase significantly.

Michael Novogratz himself recently recommended buying LUNA on social media when a user asked about recommended tokens. On March 26, 2021, he posted that he would get a LUNA tattoo if the price of the token reached $100. In fact, LUNA exceeded this price on December 24, 2021 and Novogratz revealed his tattoo on January 4, 2022.

By the time LUNA finally fell to zero, Galaxy Digital had liquidated nearly all of its positions, causing major financial harm to retail investors. The NYAG expressed that Galaxy Digital profited significantly by promoting a little-known token, but did not provide the necessary transparency. The company is said to have made over $100 million in profit from selling LUNA tokens by selling at the peak while urging retail investors to “keep the faith.”

Details of the agreement

In the context of a variety of regulatory actions, the NYAG agreed with Galaxy Digital to pay a penalty of $200 million, to be paid over three years. The first payment of $40 million is due within two weeks.

This agreement comes amid a period in which the US Securities and Exchange Commission (SEC) has completed several cryptocurrency-related investigations. The SEC has also withdrawn some lawsuits against market-leading companies such as Coinbase, Kraken and Ripple and most recently completed an investigation into crypto exchange Crypto.com.

The SEC also agreed to a $123 million settlement with a Jump Crypto subsidiary in the LUNA case, while a $4.7 billion settlement was reached with Terraform Labs. These developments demonstrate the increasing attention of regulators on the crypto industry and the need for transparency and accountability in this dynamic market.