Galaxy Digital Settles $200M Dispute Linked to Terra Promotion Fallout

Highlights:

• Galaxy Digital will pay a fine for promoting LUNA without disclosing its holdings.
• The company sold LUNA tokens, and investors lost money after the token collapsed.
• Authorities are on the lookout to protect investors from misleading promotions.

Galaxy Digital reached a $200 million settlement agreement with the New York Attorney General’s Office after being accused of promoting the LUNA token. According to the Attorney General’s office, Galaxy Digital breached New York’s Martin Act and Executive Law because it concealed its LUNA holdings along with secret sales as it promoted the token publicly. The company has three years to pay back $200 million, starting with an initial $40 million payment in the next two weeks.

NY AG files $200 million settlement with Galaxy Digital over LUNA

The algorithmic cryptocurrency LUNA helped wipe out at least $40 billion in wealth in the Terra crash two years ago, and now it will cost one of the best known crypto firms $200 million through a settlement with… pic.twitter.com/24DsrhOKsR

— MetaEra (@MetaEraHK) March 28, 2025

In addition to the monetary settlement, Galaxy Digital will also introduce rules to prevent these sorts of conflicts of interest from occurring in the future. The company must ensure that promotional statements are according to the law. In addition, it must conduct a review on applicable laws before engaging in future token transactions.

Galaxy Digital CEO Michael Novogratz, a well-known backer of LUNA, played a key role in promoting the asset. While publicly expressing confidence in the project, the company was allegedly selling large portions of its holdings. The settlement also details that Galaxy acquired 18.5 million LUNA tokens at a 30% discount through a deal with Terraform Labs, the creator of LUNA.

LUNA’s Collapse and Galaxy’s Alleged Role

At one point, LUNA was a popular cryptocurrency, but its crash wiped billions of dollars from the crypto market. During the collapse, UST lost its peg to the dollar and collapsed to $0.10. LUNA also fell from $119.5 to almost zero at the same time.

Galaxy Digital had been promoting and trading LUNA prior to its collapse. According to the Attorney General’s office, the undisclosed sales of the company made huge profits while investors lost millions. Just before the collapse, Galaxy had liquidated most of its holdings. Even though the company sold its own tokens, it continued promoting them to investors who did not know that the company had sold its holdings.

The case also showed that Galaxy was misleading about Terra’s adoption. Investors were led to believe that Terra was used in the real world through one claim that the South Korean payment app Chai ran on the Terra blockchain. Nonetheless, the NYAG discovered that these statements were not independently verified by Galaxy before being publicized, making them inaccurate.

Increased Oversight After Collapse

The NYAG settlement with Galaxy Digital is part of a bigger push to stop misconduct in the cryptocurrency space. The collapse of LUNA has drawn more scrutiny from regulators about how crypto firms promote assets and disclose their holdings. According to reports, the US Securities Exchange Commission settled a similar LUNA-related case against market-making firm Jump Crypto in late 2024 for a total of $123 million.

The collapse of LUNA has shed light on the need for better transparency and accountability as the market continues to grow. Recently, a court ruled that LUNA and UST do not qualify as securities under the Capital Markets Act in South Korea.