Galaxy Digital Holdings, led by billionaire Michael Novogratz, has agreed to pay $200 million in penalties to settle allegations of misleading practices related to the failed Luna cryptocurrency. The settlement with the New York attorney general highlights the lingering fallout from one of the crypto industry’s most infamous collapses.

The Settlement Details

The $200 million penalty will be paid in instalments through 2028, with Galaxy provisioning $166 million in its financial results to account for the fine. The settlement addresses Galaxy’s promotion and trading of Terraform Labs’ Luna token between 2020 and 2022.

While Galaxy did not admit or deny wrongdoing, the attorney general alleged the firm promoted Luna without disclosing its intent to sell the token. Galaxy sold nearly all its Luna holdings before the 2022 crash, profiting in the hundreds of millions of dollars, according to the filing.

The Luna Collapse and Its Ripple Effect

Luna, created by Terraform Labs, was designed to stabilise its sister token TerraUSD through algorithmic trading. However, both tokens collapsed in mid-2022, erasing over $40 billion in market value and triggering widespread industry turmoil.

The fallout exposed fraudulent schemes and bankruptcies across the crypto space, tarnishing reputations, including that of Novogratz, who had publicly championed Luna. The collapse was a turning point, sparking heightened scrutiny of crypto projects and their promoters.

Novogratz’s Tattoo and the “Good Reminder”

Novogratz became a high-profile advocate for Luna, even pledging to tattoo its logo if the token hit $100. In early 2022, he followed through, inking a wolf howling at the moon with “Luna” inscribed. However, the token’s catastrophic crash turned the tattoo into a symbol of overconfidence.

In 2023, Novogratz reflected on the debacle, calling the tattoo a “good reminder of hubris” and highlighting the lessons learned from trusting Terraform Labs and its creators, including Do Kwon.

Regulatory Shifts in Crypto Enforcement

The settlement comes amid a broader recalibration of U.S. crypto regulations. Authorities, including the SEC, have recently dropped or paused several enforcement actions against firms like Kraken and Consensys, indicating efforts to redefine regulatory frameworks for the sector.

Galaxy’s settlement underscores the importance of transparency and compliance in promoting digital assets. As regulators refine their approach, the case serves as a cautionary tale for the industry about the risks of unbridled promotion and insufficient due diligence.