Galaxy Digital, Michael Novogratz's Crypto Investment Firm, Settles NYAG Probe by Paying $200M

Galaxy Digital, a crypto investment firm founded by Michael Novogratz, has agreed to pay a $200 million for a settlement with the New York Attorney General's (NYAG) office.

Galaxy Digital, a crypto investment firm founded by Michael Novogratz, has agreed to pay $200 million to settle claims by the New York Attorney General’s (NYAG) office that it violated the Martin Act and New York Executive Law with its promotion of LUNA (Луна), according to a recent filing.

The case, which spanned several years, began with the NYAG’s investigation into Galaxy Digital’s involvement with LUNA, a cryptocurrency token created by Terra. The AG’s office alleged that Galaxy bought LUNA in 2020 with the intent to promote it, ultimately selling its holdings without disclosing its intent to sell and failing to disclose its financial interest in the asset.

“In doing so, Galaxy aided, abetted, and induced others to purchase the token, and failed to disclose material facts to investors,” the office stated in the filing on Thursday, August 10. The crypto firm sold “millions of tokens into the market at many multiples of its initial cost without disclosing that it was selling.”

The NYAG’s crackdown on the investment giant comes amid the U.S. SEC’s recent regulatory overhaul that saw the dismissal of multiple crypto lawsuits. In the latest development, the SEC dropped its appeal against Ripple in the XRP lawsuit.

The AG’s office also claimed that Galaxy pushed the LUNA token’s price up. “Ultimately, Galaxy helped a little-known token increase its market price from $0.31 in October 2020 to $119.18 in April 2022, while profिटing in the hundreds of millions of dollars,” the NYAG’s statement read.

Galaxy neither admitted nor denied the allegations. However, the NYAG claimed that Novogratz was one of the most vocal supporters of LUNA. The filing stated that Novogratz once acknowledged the firm’s crucial role in boosting interest in LUNA “through its marketing efforts.” In addition to explicitly showing confidence in the lesser-known token, Galaxy was involved in huge sales several times.

In a significant development, Novogratz hailed the recent regulatory shift in the U.S. landscape as a historic turning point. He views the acceptance of a Bitcoin reserve as a game-changer. It is set to accelerate global adoption and cement Bitcoin’s position as a mainstream asset.

Galaxy bought 18.5 million LUNA tokens at a discounted price, the report stated. Later, the company sold most of the tokens in batches, generating more than $100 million in revenue by March 2022.

While the NYAG reported this in the latest filing, the LUNA token crashed to a weekly low of $0.196.

As of press time, LUNA is valued at $0.1972, showing a decrease of over 7% in a day. Over the past week and month, the token has seen noteworthy dips of 4% and 13%, respectively.