Galaxy Digital to Pay $200M to Settle NYAG Probe Into Its LUNA Promotion

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

Crypto investment firm Galaxy Digital, founded by Michael Novogratz, has agreed to settle with the New York Attorney General’s office over allegations it promoted the algorithmic cryptocurrency LUNA (LUNA) while selling millions of tokens at a profit.

The crypto firm will pay $200 million to settle the allegations, which were first reported by BlockfolioPulse. Galaxy did not admit or deny the allegations.

The settlement, outlined in a filing from the NYAG and seen by last Wednesday, claims Galaxy bought LUNA in 2020. At the same time, it promoted and sold its holdings without disclosing its intent to sell, thereby violating the Martin Act and New York Executive Law, according to the NYAG.

The regulator adds that Michael Novogratz was among LUNA’s most vocal supporters, and in a moment of candour, the AG’s office credits Galaxy with helping “kickstart” interest in Luna through its marketing efforts.

However, while publicly expressing confidence in LUNA, Galaxy was quietly selling “millions of tokens into the market at many multiples of its initial cost without disclosing that it was selling,” the filing claims.

Galaxy is reportedly said to have bought 18.5 million LUNA tokens at a discount and sold most of them in tranches, and by March 2022, it had already made over $100 million.

To put that in perspective, by the time LUNA collapsed in May 2022, Galaxy had already almost entirely exited its 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 claims.

As part of the settlement, Galaxy will pay $200 million over three years, beginning with $40 million in two weeks’ time. The firm has also agreed to implement policies to prevent conflicts of interest.

These policies will include legal analysis of token investments and promotional statements, according to the regulator.

As of press time, Galaxy Digital has not made any public statements regarding the settlement.