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Galaxy Digital, the cryptocurrency investment firm led by Michael Novogratz, has agreed to a $200 million settlement with the New York Attorney General’s Office concerning its promotion of the now-defunct cryptocurrency Terra (LUNA).
Allegations and Settlement Terms
The settlement addresses claims that Galaxy Digital acquired 18.5 million LUNA tokens at a 30% discount, promoted them, and subsequently sold them without adhering to disclosure regulations. The firm allegedly disseminated false information about Terra’s adoption, particularly regarding its integration with the South Korean payments app Chai. As part of the agreement, Galaxy Digital will pay the $200 million over three years: an initial $40 million within 15 days, another $40 million within one year, and two subsequent payments of $60 million in the second and third years, respectively.
Impact of Terra’s Collapse
The collapse of Terra and its algorithmic stablecoin, TerraUSD (UST), in May 2022 led to a significant downturn in the cryptocurrency market, erasing billions in market capitalization. The failure was triggered by a large sell-off of UST, causing it to lose its peg to the US dollar and resulting in a self-reinforcing spiral that devalued both UST and LUNA.
