Galaxy Digital Fined $200M for Luna Manipulation and Fraud

The Office of the Attorney General of the State of New York (OAG) has fined Galaxy Digital Holdings Ltd $200 million following an investigation into its alleged market manipulation of the cryptocurrency Luna.

According to Axios, Galaxy Digital has reached a $200 million settlement with the New York Attorney General's Office regarding the LUNA promotion case. Galaxy promoted LUNA in a high-profile manner and achieved huge profits without disclosing its holdings and sales to the public.…

The investigation, conducted under the Martin Act and New York Executive Law Section 63(12), found that Galaxy engaged in deceptive trading practices by promoting Luna while secretly offloading its holdings.

Galaxy Digital, led by CEO Michael Novogratz, allegedly began acquiring Luna in 2020 directly from Terraform Labs at a significant discount, with the understanding that it would use its influence to drive interest in the token.

Public endorsements by Novogratz and other Galaxy representatives led to a surge in Luna’s price, reaching a peak of $119.18 in April 2022.

However, during this period, Galaxy was systematically selling its holdings, making substantial profits while failing to disclose these actions.

The collapse of Luna in May 2022 wiped out over $40 billion in market value, leaving retail investors devastated.

The OAG’s investigation concluded that Galaxy’s actions constituted fraud, deception, and market manipulation, violating state securities laws.

The OAG’s findings detail a carefully orchestrated scheme in which Galaxy Digital exploited its influence to inflate Luna’s value while ensuring its own financial gains.

The timeline of events provides critical insight into how this manipulation unfolded.

In October 2020, Galaxy acquired 18.5 million Luna tokens from Terraform Labs at $0.22 per token, nearly 30% below its market price.

Shortly after, Novogratz and Galaxy began publicly endorsing Luna, falsely promoting its adoption in real-world payments through the Chai application.

Terra’s payment app Chai is up to 80k daily active users. Koreans are fast adopters. Watch this grow. $LUNA.

By early 2021, Galaxy had facilitated high-profile media coverage of Terraform, including a Bloomberg feature filled with misleading statements about Luna’s utility and adoption.

Following this, Galaxy aggressively offloaded its holdings as retail investors, influenced by the hype, drove Luna’s price higher.

Throughout 2021, Novogratz made multiple public statements reinforcing Luna’s legitimacy, including comparisons to Bitcoin and Ethereum.

While he encouraged his followers to “keep the faith” in Luna, Galaxy continued liquidating its holdings, securing hundreds of millions in profits.

I will get a $LUNA Tatoo at $100 . Will that be

In December 2021, after Luna reached $100, Novogratz revealed a Luna-themed tattoo, further amplifying enthusiasm for the token.

However, behind the scenes, Galaxy continued selling large portions of its holdings.

Between January and April 2022, Galaxy offloaded its remaining Luna tokens, ensuring it had little to no exposure by the time the cryptocurrency collapsed in May, leaving retail investors with devastating losses.

Galaxy’s actions have had repercussions beyond financial penalties. The OAG’s investigation resulted in a $200 million fine for Galaxy Digital, marking one of the most significant penalties against a crypto firm for market manipulation.

Moving forward, the firm must also implement compliance measures to prevent similar misconduct in the future.

The case has prompted the SEC and other regulatory bodies to intensify their oversight of crypto firms, particularly regarding transparency in token sales and promotional practices.

Luna’s collapse has also accelerated discussions about classifying cryptocurrencies as securities. However, thanks to the new administration, who has been working to ensure that doesn’t happen.

Galaxy’s reputation has also suffered a severe blow, with investors questioning the firm’s ethical standards.

In January, billionaire Mike Novogratz showed off a new $LUNA tattoo. Five months later, the cryptocurrency crashed 100% to $0. pic.twitter.com/CnoqEVBn5e

Novogratz, once a prominent advocate for Luna, has faced criticism for misleading the public while profiting from the scheme.

Although he has not been personally charged, legal experts suggest that further investigations could lead to additional penalties or restrictions on his involvement in financial markets.

As it stands now, Galaxy Digital is already facing the consequences of its actions, and it might soon involve key actors like Novogratz.

As a lesson, the scandal has called for greater transparency and accountability for KOLs (Key Opinion Leaders) in the crypto space.

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