- Galaxy agreed to $200M for undisclosed LUNA sales and misleading statements.
- NYAG findings stoked worry about crypto transparency and risk.
- Investors followed the case for regulatory repercussions.
Galaxy Digital Holdings Ltd. agreed to a $200 million settlement with the New York Attorney General’s Office (NYAG) after being probed for its trading of Terra’s LUNA token. The NYAG determined that Galaxy engaged in deceptive public statements and undisclosed sales of LUNA, violating the Martin Act and Executive Law Section 63(12).
Financial and Market Impact of the Settlement
CryptoRUs on X tweeted that Galaxy bought 18.5 million LUNA tokens in 2020 at a discounted price of $0.22 per token while publicly touting the asset. The NYAG conclusions alleged that the company overhyped LUNA’s adoption and volume, helping to distort market sentiment. The May 2022 LUNA collapse that erased over $60 billion in assets increased regulatory oversight.
The settlement affected Galaxy Digital’s finances and market sentiment towards LUNA. Galaxy reported a Q4 2024 profit of $174 million and a full-year profit of $365 million with provisions for the settlement. LUNA remained under scrutiny as investors considered long-term implications.
Institutional players observed the case, evaluating its impact on digital asset disclosure. The settlement ushered in concerns about transparency in crypto investments and the risks of promotional activities with poor disclosures. Trading volume on LUNA pairs was volatile but without any consistent recovery trend.
Stock Market & Investor Sentiment
Galaxy Digital’s share price was flat despite the settlement, demonstrating that investors had priced in the financial impact. Institutional investors provisioned for the legal expenses, reducing volatility. Broader crypto market dynamics showed limited reaction, with other major tokens following existing trends.
The settlement was compared to enforcement actions against Binance and Terraform Labs, referring to increased industry scrutiny. Retail investors were mixed, with some viewing the fine as a precedent for aggressive enforcement. Others viewed it as removing legal uncertainties, allowing Galaxy to focus on operational growth.
Regulatory and Policy Implications
NYAG’s decision adds to current regulatory attempts to clamp down on secret crypto trading activities. Attorneys indicated that while the settlement doesn’t consider LUNA a security, it validates the necessity for firms to disclose promotional incentives and trading intentions. Ex-SEC attorney Marc Fagel commented that nondisclosure of financial positions can expose firms to regulatory threats, even if the asset doesn’t fall under conventional securities legislation.
Galaxy Digital agreed to the terms of compliance, including further disclosure requirements and tighter oversight of digital asset promotions. The firm must obtain legal approvals for crypto purchases and maintain records of public communications in detail.
The terms are consistent with regulatory steps towards applying investor protection to decentralized markets. The settlement imposes the importance of transparency on crypto transactions and sets a precedent for future enforcement efforts in the industry.
