Key Notes
- Galaxy Digital is set to pay a $200 million settlement to the NYAG for allegedly LUNA token promotion.
- The firm is accused of misleading investors by hyping LUNA publicly while secretly selling millions of tokens for profit.
- The settlement, signed on March 24, requires Galaxy to pay the first $40 million installment within two weeks
.
Crypto investment giant Galaxy Digital Holdings Ltd (TSE: GLXY) has agreed to pay a $200 million settlement to the New York Attorney General’s Office (NYAG) over allegedly promoting the LUNA token. Galaxy faces accusations of violating New York’s Martin Act and Executive Law by promoting LUNA without disclosing its holdings and sales of the asset.
The filing claims that while Galaxy Digital publicly hyped LUNA’s potential, it privately dumped millions of tokens, profiting massively without informing the public. The Attorney General’s office alleges that this lack of transparency misled investors, leading to major losses when LUNA collapsed in May, 2022.
As per a recent report by Axios, the settlement was officially signed on March 24 by both state authorities and Galaxy Digital representatives. It outlines a payment plan of $200 million spread over three years, with the first $40 million installment scheduled to be paid within two weeks.
Galaxy has also agreed to implement policies aimed at preventing conflicts of interest. These measures include stricter guidelines on promotional statements and tighter oversight on staff investments. Additionally, the company must conduct thorough legal reviews of all future token transactions.
The LUNA Crash
The LUNA case remains one of the most devastating crypto crashes in history. The Terra ecosystem, which comprised the LUNA token and its algorithmic stablecoin TerraUSD (UST), relied on a complex stabilization mechanism.
However, in May 2022, UST lost its peg to the US dollar, causing a death spiral. UST plummeted to $0.10, while LUNA, once valued at $119.5, became nearly worthless. The collapse wiped out over $40 billion in market value.
Galaxy Digital CEO Michael Novogratz was one of LUNA’s most popular backers. Novogratz even got a wolf-howling-at-the-moon tattoo to celebrate LUNA hitting $100. Yet, while flaunting his bullishness on social media, Galaxy was secretly offloading millions of tokens, according to the NYAG’s filing.
NYAG’s Allegations
The settlement detailed that Galaxy struck a deal with Terraform Labs, the creator of LUNA, to buy 18.5 million tokens at a 30% discount to the market price for $4 million. These tokens were released in monthly batches over the course of a year. While publicly promoting LUNA, Galaxy sold the majority of its holdings in multiple batches, leading to over $100 million in profit.
By March 2022, just before the crash, Galaxy had liquidated nearly its entire LUNA position. Even after that, the firm continued promoting LUNA without revealing its token dumping, the filing alleges.
Notably, at the time of writing, Galaxy has neither admitted nor denied the allegations.This case follows a broader crackdown on LUNA-related misconduct. In late 2024, the US Securities and Exchange Commission (SEC) reached a $123 million settlement with Jump Crypto, a market-making firm, over similar LUNA-related violations.
Disclaimer: Coinspeaker is committed to providing unbiased and transparent reporting. This article aims to deliver accurate and timely information but should not be taken as financial or investment advice. Since market conditions can change rapidly, we encourage you to verify information on your own and consult with a professional before making any decisions based on this content.
A crypto journalist with over 5 years of experience in the industry, Parth has worked with major media outlets in the crypto and finance world, gathering experience and expertise in the space after surviving bear and bull markets over the years. Parth is also an author of 4 self-published books.
