Crypto Leaders Clash Over Galaxy Digital’s $200 Million Settlement with NYAG

The crypto industry is grappling with the fallout of Galaxy Digital’s $200 million settlement with the New York Attorney General (NYAG) over its promotion of the Terra (LUNA) token. This settlement has ignited a fierce debate among industry leaders, with some rallying behind Galaxy Digital while others endorse the NYAG’s actions.

• Galaxy Digital fined $200 million for LUNA promotion
• Industry leaders split on settlement’s fairness
• LUNA crash resulted in $40 billion market loss

Galaxy Digital, led by Michael Novogratz, faced scrutiny after the NYAG accused the firm of driving market demand for LUNA, which it had bought at a 30% discount in 2020. The token’s dramatic crash in May 2022 caused a staggering $40 billion loss in the crypto market. The settlement, finalized on March 27, 2025, mandates Galaxy Digital to pay the fine in installments until 2028, with a discounted provision of $166 million reflected in their full-year results on March 28, 2025.

The Settlement Details

The LUNA token, once touted as a revolutionary stablecoin, became central to this controversy. Galaxy Digital’s purchase of 18.5 million LUNA tokens at a discount and subsequent promotion played a key role in the events leading up to the crash. The NYAG’s investigation revealed allegations of a scheme where LUNA’s price was artificially inflated before being sold off, commonly referred to as a “pump-and-dump” – a tactic where a token’s value is boosted before being sold, causing a market crash.

Industry Leaders’ Reactions

Anthony Scaramucci of SkyBridge Capital, a well-known Bitcoin advocate, came to Galaxy Digital’s defense. He labeled the NYAG’s actions as “lawfare” – the use of legal action as a weapon in disputes – and criticized the New York Martin Act, a state law that allows legal action without proving intent:

This makes no sense and is completely at odds with the SEC and DOJ which have been pursuing actions against Do Kwon and Terraform. It’s LAWFARE pure and simple due to an obscure but dangerously powerful New York law known as the Martin Act. The law has no need to prove intent creating a low standard of proof that can open the door for abuse like this. It shouldn’t exist.

On the flip side, Mike Belshe of BitGo supported the NYAG’s case, highlighting what he saw as a clear pump-and-dump pattern in Galaxy Digital’s actions. Belshe emphasized the importance of principle-based regulation in the crypto market, warning of the dangers of over-regulation if such actions are not addressed:

The pattern here is unmistakable. We must advocate for principle-based regulation to ensure the integrity of our industry. Ignoring these actions could lead to over-regulation that stifles innovation.

Broader Implications

The disagreement between Scaramucci and Belshe reflects deeper debates within the crypto community about the balance between regulatory oversight and the need for ethical practices. As regulatory scrutiny intensifies, particularly after high-profile incidents like the LUNA crash, the industry must navigate these waters carefully.

The current crypto market, valued at $2.65 trillion with Bitcoin holding a 61.2% dominance, underscores the scale of the LUNA crash’s impact. This settlement could influence how other firms approach token marketing and promotion, setting a precedent for regulatory actions against crypto firms.

Ethical and Regulatory Considerations

The use of the Martin Act in this case raises questions about its fairness and effectiveness. Critics argue that it allows for potential abuse due to its low standard of proof, while supporters see it as a necessary tool for addressing financial misconduct in the crypto space.

Moreover, the case brings to light the ethical responsibilities of crypto firms in promoting tokens. The potential for promotions to lead to significant market impacts demands a higher standard of accountability and transparency.

Key Questions and Takeaways

What was the settlement between Galaxy Digital and the NYAG about?
Galaxy Digital settled with the NYAG for a $200 million fine due to its role in promoting the Terra (LUNA) token, which led to a market crash.

Why did Anthony Scaramucci criticize the settlement?
Scaramucci criticized it as “lawfare,” arguing that it was an abuse of the New York Martin Act, which does not require proof of intent, making it susceptible to misuse.

What was Mike Belshe’s stance on the settlement?
Belshe supported the NYAG’s case, noting a pump-and-dump pattern in Galaxy Digital’s actions and advocating for principle-based regulation in the crypto market.

What impact did the LUNA crash have on the crypto market?
The LUNA market crash in May 2022 led to a $40 billion loss in the crypto market.

How is the current crypto market valued?
The crypto market is currently valued at $2.65 trillion, with Bitcoin holding a 61.2% dominance.

As the crypto industry continues to evolve, the debate over Galaxy Digital’s settlement serves as a stark reminder of the delicate balance between innovation, regulation, and ethical responsibility. Whether you’re a Bitcoin maximalist or a supporter of altcoins, understanding these dynamics is crucial for anyone invested in the future of decentralized finance. After all, in a world where $200 million fines are on the table, it’s not just about HODLing; it’s about holding firms accountable, too.