NYAG Reaches $200 Million Settlement with Galaxy Digital, Novogratz’s Crypto Bank, for LUNA Sales
Galaxy Digital, led by Michael Novogratz, has reached a $200 million settlement following allegations of promoting LUNA while profiting from the sale of millions of tokens prior to the token’s downturn.
Galaxy Digital, the cryptocurrency investment firm established by Michael Novogratz, has consented to a $200 million settlement with the New York Attorney General’s office concerning claims that it promoted the algorithmic cryptocurrency LUNA (LUNA) while discreetly selling millions of tokens at a profit. The firm has neither admitted nor denied the allegations.
The settlement details, as indicated in a filing from the NYAG, reveal that Galaxy acquired LUNA in 2020. Concurrently, it advertised and sold its holdings without revealing its intention to sell, thereby breaching the Martin Act and New York Executive Law, according to the NYAG.
The agreement specifies that Michael Novogratz was one of LUNA’s most prominent advocates, acknowledging that Galaxy “helped ‘kickstart’ interest in Luna through its marketing efforts.”
Despite publicly voicing confidence in LUNA, Galaxy clandestinely sold “millions of tokens into the market at many multiples of its initial cost without disclosing that it was selling,” as stated in the filing.
Reportedly, Galaxy acquired 18.5 million LUNA tokens at a discount and liquidated most of them in portions, reaping over $100 million by March 2022. By the time LUNA fell in May 2022, Galaxy had significantly reduced its holdings. According to the NYAG, “Ultimately, Galaxy assisted a relatively unknown token in elevating its market price from $0.31 in October 2020 to $119.18 in April 2022, gaining several hundred million dollars in the process.”
As part of the settlement, Galaxy will pay the $200 million over three years, commencing with an initial payment of $40 million within two weeks. The firm has also committed to establishing policies to mitigate conflicts of interest, which include legal reviews of token investments and promotional statements. As of this writing, Galaxy Digital has not made any public comments regarding the issue.