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Galaxy Digital Holdings, led by CEO Michael Novogratz, has agreed to pay $200 million in penalties as part of a settlement with the New York Attorney General (NYAG), according to Bloomberg.
This settlement addresses civil claims related to the investment firm’s promotion of the now-infamous Luna cryptocurrency, which collapsed dramatically in mid-2022, resulting in massive financial losses across the crypto market.
Galaxy Digital $200 Million Settlement
The settlement, announced on Thursday, resolves allegations that Galaxy Digital violated regulations by promoting Luna without adequately disclosing its intent to sell the asset.
Between late 2020 and 2022, Galaxy had actively marketed Luna and its sister token, TerraUSD, which were intended to maintain value through algorithmic trading. Both tokens ultimately plummeted to near-zero value, erasing over $40 billion in market capitalization.
As part of the agreement, Galaxy Digital will pay the undiscounted penalty in installments until 2028. To prepare for this financial obligation, the company recorded a legal provision of $166 million in its full-year results, reflecting the impact of discounting on the penalty.
In a statement to Bloomberg, Novogratz acknowledged the gravity of the situation, stating, “This was not an easy decision and one that we considered carefully.”
The company’s CEO further pointed to the deception from Do Kwon and Terraform Labs, the creators of Luna, which misled many institutional investors. Novogratz emphasized that Galaxy has cooperated fully with regulators throughout the investigation.
Notably, Novogratz had previously made headlines for promising to get a tattoo of Luna if the token reached $100—a claim that underscored his confidence in the asset before its catastrophic decline.
In early 2022, he even shared a photo of the tattoo, which features a wolf howling at the moon alongside the word “Luna.” The New York attorney general’s office highlighted that Galaxy profited from Luna’s price surge, selling nearly all its holdings before the crash.
Luna’s Impact On The Cryptocurrency Market
As highlighted by Bloomberg, the collapse of Luna not only devastated its investors but also triggered a domino effect of failures and scandals throughout the cryptocurrency industry, leading to numerous bankruptcies and exposing fraudulent activities.
This settlement comes amid a broader context of shifting regulatory approaches within the US crypto landscape. Recently, the SEC has dropped enforcement actions against other notable crypto firms, including Kraken and Consensys, signaling a possible reevaluation of the regulatory framework surrounding digital assets.
Despite the challenges posed by the settlement, Galaxy Digital reported a net income of $174.5 million for the fourth quarter, down from $301.5 million in the same period the previous year
At the time of writing, Luna, now rebranded to Luna Classic (LUNC), trades at $0.00005919, reflecting a notable 12% drop in the monthly time frame and over 60% year-to-date.
Featured image from DALL-E, chart from TradingView.com
