NYAG Agrees on $200m Settlement with Galaxy Digital's Crypto Bank Over LUNA Transactions

Galaxy Digital, a cryptocurrency investment firm established by Michael Novogratz, has consented to pay $200 million to resolve claims that it promoted LUNA while secretly selling millions of tokens for a profit before the token's collapse.

According to a filing from the NYAG, Galaxy Digital, a cryptocurrency investment company established by Michael Novogratz, has agreed to a $200 million settlement with the New York Attorney General's office over allegations it promoted the algorithmic cryptocurrency LUNA (LUNA) while discreetly selling millions of tokens for a profit. The firm did not acknowledge or reject the allegations.

The settlement, detailed in a filing from the NYAG, asserts that Galaxy bought LUNA in 2020. At the same time, it promoted and sold its holdings without revealing its intention to sell, thereby violating the Martin Act and New York Executive Law, according to the NYAG.

In the settlement agreement, the regulator states that Michael Novogratz was among LUNA's most outspoken proponents, admitting in a moment that Galaxy "helped 'kickstart' interest in Luna through its marketing efforts."

While publicly expressing confidence in LUNA, Galaxy quietly sold "millions of tokens into the market at many multiples of its initial cost without disclosing that it was selling," the filing states.

Galaxy reportedly acquired 18.5 million LUNA tokens at a discount and sold most of them in tranches, making over $100 million by March 2022. By the time LUNA collapsed in May 2022, Galaxy had already exited almost its entire position. "Ultimately, Galaxy helped a little-known token increase its market price from $0.31 in October 2020 to $119.18 in April 2022, while profiting in the hundreds of millions of dollars," the NYAG alleges.

Under the settlement, Galaxy will pay $200 million over three years, starting with $40 million in two weeks. The firm also agreed to implement policies to prevent conflicts of interest, including legal analysis of token investments and promotional statements. As of press time, Galaxy Digital has not made any public statements on the matter.