Galaxy Digital Pays $200M in Terra Settlement
Michael Novogratz's crypto investment firm, Galaxy Digital, has agreed to pay $200 million to settle allegations of promoting the collapsed Terra (LUNA) cryptocurrency. The settlement, reached with the New York Attorney General's Office (NYAG), concludes a lawsuit alleging Galaxy Digital violated disclosure rules.
Key Details of the Settlement
According to NYAG documents filed on March 24, Galaxy Digital purchased 18.5 million LUNA tokens at a 30% discount. The firm then allegedly promoted these tokens before selling them, without adhering to necessary disclosure regulations. The NYAG alleges that Galaxy Digital's actions helped boost LUNA's price from $0.31 in October 2020 to $119.18 in April 2022, resulting in hundreds of millions of dollars in profit for the firm.
The settlement mandates Galaxy Digital pay $200 million in monetary relief over three years, structured as follows:
- $40 million within 15 days
- $40 million within one year
- Two payments of $60 million each in the second and third years
Allegations of False Claims
The NYAG also accused Galaxy Digital and Novogratz of disseminating false information about Terra's usage. Specifically, the firm allegedly claimed that the South Korean payment app, Chai, was built on the Terra blockchain, a claim deemed inaccurate by the NYAG. This false claim was further amplified in a press release distributed to Bloomberg, exaggerating Chai's user base and transaction volume.
Terra's Collapse and Market Impact
The TerraUSD (UST) stablecoin and its associated LUNA token experienced a catastrophic collapse in May 2022. This event, triggered by a large UST sell-off, resulted in a loss of billions in market capitalization and contributed to a broader cryptocurrency market downturn. The incident serves as a stark reminder of the risks associated with algorithmic stablecoins.
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