Galaxy Digital Holdings Agrees to Pay $200M Settlement to New York AG Over LUNA Promotion

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)

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 allegations of promoting the LUNA token despite dumping it to generate huge profits.

According to a recent report by Axios, the settlement was officially signed on March 24 by both state authorities and Galaxy Digital representatives. It stipulates a payment plan of $200 million to be spread over three years, with the first installment of $40 million set to be paid within two weeks.

Furthermore, Galaxy has 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 Case

The case centers around LUNA, a cryptocurrency that crashed massively in May 2022. The Terra ecosystem, which comprised the LUNA token and its algorithmic stablecoin TerraUSD (UST), relied on a complex stabilization mechanism. However, 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.

The settlement, which was first announced in December 2023, unveils 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 Galaxy reportedly promoted LUNA to the public, it sold the majority of its holdings in multiple batches, ultimately leading to over $100 million in profit for the firm. By March 2022, just before the crash, Galaxy had liquidated nearly its entire LUNA position. Even after that, the firm continued promoting LUNA without disclosing its token dumping, the filing asserts.

The case marks a significant development in the aftermath of the LUNA crash. 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.