Mar 29, 2025

Galaxy Digital Agrees to $200 Million Settlement with New York Attorney General Over LUNA Promotion

Galaxy Digital, the digital asset firm founded by Mike Novogratz, has agreed to pay $200 million to settle allegations brought by the New York Attorney General’s Office over its role in the promotion of the now-defunct Terra-LUNA ecosystem. The agreement stems from Galaxy’s involvement in the events leading up to the 2022 collapse, which erased an estimated $60 billion in value from the crypto markets.

According to the Assurance of Discontinuance published by New York Attorney General Letitia James, Galaxy Digital publicly endorsed LUNA to U.S. investors while allegedly concealing plans to exit its position. The firm had acquired millions of LUNA tokens at a steep discount, and according to the settlement, it sold a substantial portion without disclosing this intent—despite continuing to promote the token’s prospects.

Background of the Allegations

The NYAG’s investigation revealed that Galaxy Digital acquired 18.5 million LUNA tokens at a 30% discount in 2020, then proceeded to offload a large portion of its holdings while publicly promoting the token as a promising investment—without disclosing its intent to exit. The alleged strategy, which reportedly generated hundreds of millions in profits, was described by the NYAG as a violation of both the Martin Act and the New York Executive Law.

While Mike Novogratz, Galaxy’s founder and CEO, made high-profile public endorsements of LUNA—most famously unveiling a LUNA-themed tattoo—the firm was simultaneously liquidating its discounted holdings at a substantial markup. According to the settlement document, Galaxy purchased the token at $0.31 in 2020 and profited significantly as its price soared to over $119 in April 2022, shortly before the project’s catastrophic collapse.

Galaxy helped a little-known token increase its market price… while profiting in the hundreds of millions of dollars,” the filing stated.

Galaxy has neither admitted nor denied the allegations but agreed to the $200 million settlement, to be paid in stages over three years. The initial $40 million payment is due within two weeks, with the remainder distributed over the following three years. The firm also committed to implementing stricter internal compliance measures, including improved disclosure protocols and tighter oversight of employee investment behavior.

The financial hit from the legal case was reflected in Galaxy’s most recent earnings. The firm reported $174 million in Q4 net income and $365 million for the full year of 2024, with the $166 million legal provision tied to the NYAG settlement factored into these results.

Terra’s Fallout Continues to Haunt the Industry

The settlement with Galaxy Digital is the latest chapter in the long-running aftermath of the Terra-LUNA collapse, one of the most catastrophic events in crypto history. The Terra ecosystem, built on the dual-token model of LUNA and its algorithmic stablecoin TerraUSD (UST), unraveled in May 2022, erasing over $40 billion in market value and triggering a wave of insolvencies across the digital asset space, including major players such as BlockFi and Three Arrows Capital.

Legal and regulatory fallout has continued into 2025. Do Kwon, co-founder of Terraform Labs, was apprehended by Montenegrin authorities after months on the run. He was extradited to the United States in December 2024 and is scheduled to stand trial in January 2026 on multiple charges related to securities fraud. His arrest followed an Interpol red notice, issued after the project’s collapse sparked global investigations.

Meanwhile, Terraform Labs, the firm behind the Terra blockchain, has reached a staggering $4.47 billion settlement with the U.S. Securities and Exchange Commission (SEC). The company is now in the process of shutting down operations and unwinding assets through a bankruptcy distribution plan, with a creditor claims portal set to open by March 31. Combined liabilities owed to the SEC and creditors exceed $4.6 billion, while the firm’s total remaining assets are reportedly worth only around $500 million.

Quick Facts:

  • Galaxy Digital will pay $200 million to settle allegations with the New York Attorney General’s Office regarding the promotion of LUNA without proper disclosure.
  • The firm allegedly acquired 18.5 million LUNA tokens at a discount and sold them without informing investors, leading to significant profits.
  • The settlement includes a three-year payment plan and mandates enhanced compliance measures to prevent future conflicts of interest.
  • Galaxy Digital’s Q4 net income declined to $174.5 million, impacted by a $166 million legal provision related to the settlement.

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