Galaxy Digital, the cryptocurrency investment firm founded by Michael Novogratz, has agreed to pay a $200 million fine to settle allegations that it violated New York law by promoting the LUNA cryptocurrency without disclosing its financial interests.
Misleading Conduct and the $200 Million Fine
According to New York Attorney General Letitia James, Galaxy Digital failed to disclose that it owned and sold LUNA while actively promoting the coin. This action was deemed misleading to investors and violated New York financial regulations.
The settlement requires Galaxy Digital to make payments as follows:
- $40 million within 15 days of the issuance of the cease and desist (AD) order
- $40 million within one year
- $60 million within two years
- The remaining amount will be paid within three years
Galaxy Digital and the Market Manipulation Strategy
The Attorney General’s Office alleges that from 2020 to 2022, Galaxy Digital purchased and promoted LUNA extensively to build market confidence. The company profited significantly from the token sale while encouraging investors to participate.
Evidence shows that LUNA increased in price from $0.31 in October 2020 to a record high of $119.18 in April 2022. During this period, Michael Novogratz also publicly supported LUNA, even getting a tattoo to commemorate when the coin's price surpassed the $100 mark. However, after peaking, LUNA collapsed in mid-2022, wiping out more than $40 billion in market capitalization and leaving many investors in the lurch.
New York's commitment to protecting investors
Attorney General Letitia James emphasized that the decision to sanction Galaxy Digital is a warning to other crypto companies:
"Today's settlement sends a clear message that we will not tolerate the sale of unregistered securities in New York. We will continue to protect investors and hold companies accountable for their actions."
The settlement also states that the New York Attorney General's office can continue to investigate or prosecute if it discovers additional violations from Galaxy Digital in the future.
A Lesson on Transparency in Cryptocurrency Markets
While Galaxy Digital has not admitted wrongdoing, it has agreed to the remedies requested by New York authorities. The case underscores the importance of transparency in the cryptocurrency space, especially as digital assets increasingly attract the attention of investors and financial regulators.
