On March 28, 2025, Galaxy Digital, a prominent cryptocurrency investment firm led by billionaire Mike Novogratz, agreed to pay a $200 million fine to settle allegations of market manipulation involving the LUNA token, as announced by the New York Attorney General’s (NY AG) office. The settlement addresses claims that Galaxy Digital engaged in deceptive practices by secretly selling off LUNA tokens while publicly promoting them, reaping significant profits before the Terra ecosystem’s catastrophic collapse in May 2022. This Galaxy Digital LUNA fine marks a significant moment in the ongoing scrutiny of crypto fraud 2025, highlighting the need for accountability in the digital asset space.
The Allegations and Settlement Details
The NY AG’s investigation revealed that in 2020, Galaxy Digital struck a deal with Terraform Labs, the company behind the Terra blockchain, and its CEO Do Kwon. According to the allegations, Terraform Labs sold Galaxy Digital 18.5 million LUNA tokens at a 30% discount, valued at the time, in exchange for the firm’s public endorsement of the token. While Galaxy Digital vocally supported LUNA—boosting its credibility and price—the firm allegedly sold off its holdings in secret, netting hundreds of millions in profits. This LUNA price manipulation scheme continued until Terra’s collapse, which wiped out $60 billion in market value and devastated countless investors.
The settlement requires Galaxy Digital to pay $200 million, a figure that includes disgorgement of profits, penalties, and restitution for affected investors. The NY AG’s office emphasized that such deceptive practices undermine market integrity and harm retail investors, many of whom lost life savings in the Terra crash. Posts on X reflect a mixed sentiment: some users view the fine as a necessary step toward accountability, with one user stating, “Finally, some justice for LUNA victims,” while others argue it’s a drop in the bucket compared to the scale of the losses, noting Galaxy’s earlier profits of $355 million from LUNA sales in Q1 2022, as reported by CoinDesk.
The Terra Collapse and Its Fallout
The Terra ecosystem, comprising the LUNA token and the UST stablecoin, was once a darling of the DeFi space, with its total value locked (TVL) peaking at over $20 billion, according to DeFiLlama. However, its algorithmic model—where LUNA was burned to mint UST and maintain its $1 peg—proved unsustainable. In May 2022, UST de-pegged, triggering a death spiral that saw LUNA’s supply inflate from 400 million to 6.9 trillion tokens in days, crashing its price by 99%. The collapse erased $60 billion from the market, as reported by Coin68, and set off a domino effect, contributing to the downfall of firms like Three Arrows Capital and exacerbating the 2022 crypto winter.
Galaxy Digital’s involvement in Terra dates back to a $25 million venture round in January 2021, alongside other major funds like Coinbase Ventures and Pantera Capital. Novogratz himself became a vocal supporter, famously tattooing a LUNA-themed design on his arm and declaring himself a “Lunatic”—a term for Terra enthusiasts. However, the NY AG alleges that while Novogratz and Galaxy Digital publicly hyped LUNA, they were quietly offloading their holdings, a practice known as “shilling,” which artificially inflated the token’s price and misled investors.
Broader Implications for the Crypto Industry
This New York AG settlement is part of a broader crackdown on crypto misconduct in 2025. Earlier this year, the SEC fined Digital Currency Group $38 million for misleading investors, and in December 2024, Jump Trading’s subsidiary Tai Mo Shan paid $123 million for similar LUNA-related fraud. These cases underscore a growing regulatory focus on transparency and accountability, especially as the crypto market recovers, with Bitcoin trading at $83,134 on March 30, 2025, after hitting $100,000 in December 2024.
For the industry, the Galaxy Digital fine raises questions about the ethics of institutional involvement in crypto. While some argue that such penalties deter fraud, others on X worry that heavy-handed regulation could stifle innovation, especially for smaller projects. The case also highlights the lingering impact of the Terra collapse, which continues to shape investor skepticism and regulatory policy.
History of LUNC Token Price Fluctuations, Screenshot from CoinGecko at 10 AM on March 31, 2025
Conclusion
The $200 million fine against Galaxy Digital for LUNA price manipulation is a stark reminder of the risks in the crypto market and the consequences of deceptive practices. As crypto fraud 2025 cases mount, the Galaxy Digital LUNA fine and New York AG settlement signal a new era of accountability, potentially paving the way for a more transparent and trustworthy digital asset ecosystem. However, the scars of Terra’s collapse remain, and rebuilding investor confidence will require more than just fines—it demands systemic change.
