Michael Novogratz’s Galaxy Digital Holdings will pay $200 million in penalties over the investment firm’s role in promoting the failed Luna cryptocurrency, as part of a settlement with the New York attorney general.
Galaxy reached an agreement with the state authority on Thursday to resolve civil claims relating to certain investments, trading and public statements it had made regarding Luna between late 2020 and 2022, the company said in an earnings statement Friday.
The settlement includes an undiscounted monetary penalty of $200 million, payable in instalments until 2028. Galaxy noted a legal provision of $166 million to cover the fine in its full-year results on Friday, noting the impact of discounting.
The investment firm was accused of violating rules in promoting an asset without disclosing its intent to sell it, according to a filing published by the New York attorney general. Galaxy did not admit or deny wrongdoing as part of the deal, the filing said.
Galaxy and Novogratz began promoting Terraform Labs’ Luna cryptocurrency in 2020, a token whose main purpose was to support the value of its sister coin TerraUSD through algorithmic trading. Both tokens later spiraled to near zero in mid-2022, wiping out more than $40 billion in market value.
“This was not an easy decision and one that we considered carefully,” Novogratz, the founder and chief executive officer of Galaxy, said in a statement to Bloomberg. “Do Kwon and Terraform, the creators of Luna, deceived us and many other prominent institutional investors. Over the last few years, Galaxy has cooperated fully with regulators – including the New York attorney general.”
Novogratz had promised he would get a Luna tattoo if the token’s price reached $100, which he posted a photo of in early 2022. At the same time, Galaxy was profiting from Luna’s price rise in the hundreds of millions of dollars, the New York attorney general’s office said. Galaxy sold nearly all of its Luna holdings prior to the crash, it added.
Luna’s collapse kicked off a series of blow-ups across the crypto industry, causing waves of bankruptcies, unmasked frauds and widespread scandal. The now-infamous tattoo on Novogratz’s arm—a wolf howling at the moon with the word “Luna” by its side—serves as a “good reminder of hubris,” he said in 2023.
The settlement comes as many long-running crypto enforcement actions have been dropped or paused by U.S. authorities, seeking to reestablish the regulatory playing field ahead of developing new rules for the sector. The U.S. Securities and Exchange Commission dropped lawsuits against crypto firms Kraken and Consensys, it said in litigation notices published Thursday, as well as an action against the crypto activities of Cumberland DRW.
Galaxy reported net income for the fourth quarter of $174.5 million, compared to $301.5 million a year ago. This included the impact of the settlement, it said.
