Galaxy Digital Settles $200M Case Over LUNA Token Promotion

Galaxy Digital, a leading crypto investment firm, has agreed to a $200 million settlement with the New York State Attorney General's office. This settlement follows allegations that the firm illegally supported the now-defunct LUNA token, which was part of the Terra ecosystem.

The New York Attorney General, Letitia James, accused Terra founder Do Kwon of recruiting Galaxy Digital to purchase LUNA tokens and promote his project in the Western market. According to the allegations, Galaxy Digital acquired 18.5 million LUNA tokens from Terraform Labs in October 2020 at $0.22 per token, which was nearly 30% less than the market price of $0.31 at the time.

Under the leadership of its founder and CEO Michael Novogratz, Galaxy Digital is said to have significantly boosted interest in LUNA through its marketing efforts. The firm began promoting LUNA and Terraform on social media in November 2020, which led to an increase in the token's price and trading volume. Novogratz even posted on social media that he would get a LUNA tattoo if the token's price reached $100. This prediction came true on December 24, 2021, when LUNA hit $100.84, and Novogratz publicly unveiled his tattoo on January 4, 2022. However, while Novogratz was publicly expressing his bullishness on LUNA, Galaxy Digital was selling millions of tokens into the market at multiples of its initial cost without disclosing its selling activities.

The New York Attorney General's office noted that Galaxy Digital had almost completely exited its LUNA position by the time the Terra ecosystem collapsed in May 2022. This settlement marks a significant development in the ongoing legal battles surrounding the Terra ecosystem and its founder, Do Kwon. Kwon was arrested in Montenegro in 2023 while attempting to board a flight to Dubai using a fake Costa Rican passport. He is currently facing fraud charges in both the United States and his native country. Montenegrin authorities decided to extradite him to the US in December, where he faces a maximum penalty of 130 years in prison. His trial is currently scheduled for January 2026.

The settlement between Galaxy Digital and the New York Attorney General's office underscores the regulatory scrutiny that crypto investment firms face. The allegations against Galaxy Digital highlight the importance of transparency and disclosure in the crypto market. The firm's actions, as alleged, raise questions about the ethical implications of promoting a token while simultaneously selling it without disclosing such activities to the public. This case serves as a reminder to other firms in the industry to adhere to regulatory standards and maintain transparency in their dealings.