Galaxy Digital, founded by Michael Novogratz, will pay $200 million in response to allegations that it promoted LUNA while profiting from the sale of millions of tokens before the cryptocurrency’s downturn.
The cryptocurrency investment firm has reached a $200 million settlement with the New York Attorney General’s office regarding claims it endorsed the algorithmic currency LUNA (LUNA) while clandestinely selling off significant amounts of tokens for profit. The firm has not admitted to or denied these allegations.
Details of the settlement, included in a filing from the NYAG, indicate that Galaxy acquired LUNA in 2020. Simultaneously, the firm promoted and sold its holdings without revealing its selling intentions, thereby allegedly breaching the Martin Act and New York Executive Law, according to the NYAG.
The agreement states that Michael Novogratz was one of the most prominent advocates for LUNA, acknowledging that Galaxy “helped ‘kickstart’ interest in Luna through its marketing efforts.”
While publicly maintaining confidence in LUNA, Galaxy discreetly sold “millions of tokens into the market at many multiples of its initial cost without disclosing that it was selling,” the filing asserts.
Reports indicate that Galaxy purchased 18.5 million LUNA tokens at a discounted rate, selling the majority in stages and generating over $100 million by March 2022. By the time LUNA collapsed in May 2022, Galaxy had largely divested its holdings. “Ultimately, Galaxy aided a relatively unknown token in increasing its market price from $0.31 in October 2020 to $119.18 in April 2022, while reaping profits in the hundreds of millions of dollars,” claims the NYAG.
As part of the settlement, Galaxy is required to pay $200 million over three years, beginning with an initial payment of $40 million in two weeks. The firm has also committed to implementing policies aimed at preventing conflicts of interest, which include legal scrutiny of token investments and promotional claims. As of the time of this report, Galaxy Digital has not released any public comments regarding the situation.