New York Attorney General and Galaxy Digital settle for $200 million

New York Attorney General Letitia James and Mike Novogratz’s Galaxy Digital have agreed to a $200 million settlement over an investigation into alleged violations committed by the firm in promoting the collapsed cryptocurrency LUNA.

Galaxy Digital allegedly masked its multi-million dollar exit strategy while publicly promoting LUNA as a promising investment to U.S. investors, according to the settlement published in an Assurance of Discontinuance from James’s office notarized on March 24. Endorsements from Galaxy Digital were supposedly critical to Terra’s success among Americans since the crypto project was mainly based in South Korea.

"But while Novogratz posted pictures of his tattoo and expressed his Luna bullishness to the public, Galaxy sold millions of tokens into the market at many multiples of its initial cost without disclosing that it was selling," the settlement said. "Ultimately, Galaxy helped a little-known token increase its market price from $0.31 in October 2020 to $119.18 in April 2022 while profiting in the hundreds of millions of dollars."

The NYAG argued that Novogratz’s crypto-focused service provider booked huge profits from LUNA trading without complying with disclosure requirements. Quietly liquidating its massive LUNA position ultimately contributed to the token’s widely reported 2022 collapse, according to the settlement. Galaxy Digital’s actions violated New York’s Martin Act and Executive Act, per the NYAG. Novogratz’s firm neither admitted nor denied the allegations.

LUNA was a central component of the Terra ecosystem alongside its sister token and algorithmic stablecoin TerraUSD, popularly known as UST. The twin token system ultimately collapsed in May 2022, leaving behind a $40 billion hole and bankrupting several cryptocurrency giants like BlockFi and Three Arrows Capital in its wake.

Montenegro police eventually arrested Terra cofounder Do Kwon following the issuance of an Interpol red notice. He was jailed for four months on travel paper forgery charges. Kwon is scheduled to stand trial in January 2026 following his extradition to the U.S. last December.

Meanwhile, Terraform Labs, the company behind Terra’s blockchain and LUNA/UST, signed a record $4.47 billion settlement with the Securities and Exchange Commission. The firm will disband and is currently unwinding assets in a bankruptcy distribution plan. A March 28 notice said the Terraform Labs Creditors' claims portal would open on March 31. Terraform owes creditors and the SEC at least $4.65 billion in combined liabilities. Its assets are estimated at around $500 million.

Corrected to remove reference to a lawsuit against Galaxy Digital.