Galaxy Digital Reaches $200M Settlement With New York Authorities Over LUNA-Related Issues

Galaxy Digital, the crypto investment firm led by Michael Novogratz, has agreed to a $200 million settlement with the New York Attorney General’s Office (NYAG). The firm faced allegations of promoting the algorithmic cryptocurrency LUNA while simultaneously selling large amounts of the token for profit without disclosure.

LUNA, issued by Terraform Labs, was at the center of one of the biggest collapses in the crypto market. A federal district court found Terraform and its founder, Do Kwon, guilty of fraud and unregistered securities offerings in April 2024. The court ordered them to pay $4.5 billion to compensate affected individuals.

Allegations Against Galaxy Digital

According to the NYAG’s filing, Galaxy Digital purchased LUNA in 2020 and promoted it while discreetly offloading its holdings. The agency argued that this violated the Martin Act and New York Executive Law. The filing also highlighted Novogratz’s role in publicizing LUNA, noting that Galaxy contributed to generating interest in the token through its promotional activities.

While advocating for LUNA’s potential, the firm allegedly sold millions of tokens at significantly higher prices than its initial purchase cost without informing the public of its sell-off strategy. Galaxy initially acquired 18.5 million LUNA tokens at a discounted rate and gradually liquidated its holdings, generating over $100 million by March 2022.

By the time LUNA’s price crashed in May 2022, Galaxy had already divested nearly all its holdings. The NYAG stated that Galaxy played a role in elevating LUNA’s price from $0.31 in October 2020 to a peak of $119.18 in April 2022 while profiting in the hundreds of millions.

Terms of the Settlement

Under the agreement, Galaxy Digital will pay the $200 million settlement over three years, beginning with a $40 million payment due in two weeks. The firm also committed to strengthening internal compliance measures, including conducting legal reviews before making token investments or promotional statements.

In a similar case, the U.S. Securities and Exchange Commission (SEC) reached a $123 million settlement late last year with Tai Mo Shan, a subsidiary of Jump Crypto Holdings LLC, over its involvement with LUNA.