Galaxy fined $200M for suspected LUNA manipulation in New York
Galaxy Digital, led by Michael Novogratz, has been directed to pay a hefty sum of $200 million to the state of New York following allegations of manipulating the price of LUNA tokens. The company was accused of engaging in practices that artificially inflated the value of LUNA, which is connected to the now-defunct Terra stablecoin.
In response to the legal filing, Michael Novogratz expressed that settling this matter was a strategic decision to allow Galaxy to focus on advancing innovation and growth in the digital asset and artificial intelligence sectors without being encumbered by legal disputes. The accusations stem from Galaxy’s involvement with Terra in 2020 when the founder, Do Kwon, enlisted the company’s help in purchasing and popularizing LUNA tokens.
According to the legal filing, Galaxy acquired over 18.5 million LUNA tokens from Terraform at a discounted rate, deploying strategies that led to a significant increase in the token’s market value. However, despite publicly endorsing LUNA and even commemorating the price milestone with a Luna tattoo, Galaxy was allegedly discreetly offloading its LUNA holdings without informing the public.
The agreement between Galaxy and Terra involved an investment of $4 million in exchange for a discounted price on LUNA tokens, which were gradually handed over to Galaxy over a period of several months. Despite claims of thorough due diligence conducted by Galaxy before entering into the partnership with Terra, the legal filing suggests that Galaxy’s actions misled investors and contributed to the artificial inflation of LUNA prices.
The situation came to a head when Galaxy sold a significant portion of its LUNA holdings in early 2021, prompting investigations and subsequent settlement discussions with the New York attorney general’s office. This ultimately led to the $200 million settlement between Galaxy and the state of New York. The agreement coinciding with Galaxy’s earnings announcement indicates a shift towards resolving legal disputes to focus on the company’s core missions and objectives.
In conclusion, the saga between Galaxy Digital, Terra, and the state of New York highlights the complexities and consequences of market manipulation in the digital asset space. The settlement serves as a reminder of the regulatory scrutiny and legal repercussions that companies face when engaging in questionable practices within the cryptocurrency market.