Michael Novogratz’s Galaxy Digital has agreed to pay $200 million in penalties to settle civil claims with the New York Attorney General (NYAG) over its role in promoting the now-defunct Luna cryptocurrency. The settlement, announced alongside the firm’s Q4 earnings, closes a turbulent chapter in Galaxy’s crypto journey.

$200M Settlement Over Luna Promotions

Galaxy’s penalty stems from its promotion, trading, and investment activities in Luna between 2020 and 2022. The NYAG accused the firm of failing to disclose its intent to sell Luna while publicly promoting it — a violation of financial regulations.

Though Galaxy neither admitted nor denied wrongdoing, it will pay the full amount in instalments until 2028. A provision of $166 million has already been accounted for in its 2024 financials to reflect the discounted impact.

Luna’s Rise and Fall: A Costly Hype Train

Luna, the native token of Terraform Labs, was designed to support the TerraUSD (UST) stablecoin through algorithmic trading. Galaxy and Novogratz were early supporters, with the billionaire CEO famously vowing to get a Luna tattoo if the token hit $100 — a promise he fulfilled in 2022.

At its peak, Galaxy earned hundreds of millions of dollars from Luna before selling off most of its holdings ahead of the 2022 collapse. When Terra’s ecosystem imploded, over $40 billion in market value was wiped out, sparking a series of crypto crashes and bankruptcies.

“We Were Deceived” — Novogratz Blames Terraform

In a statement to Bloomberg, Novogratz said the decision to settle was “not easy”, but necessary. He blamed Do Kwon and Terraform Labs, calling them deceptive actors who misled institutional investors, including Galaxy.

Galaxy claims to have cooperated fully with regulators and now views the experience as a cautionary tale. “The tattoo is a good reminder of hubris,” Novogratz remarked last year, acknowledging the lessons learned from overexposure to hype-driven projects.

Crypto Enforcement Landscape Shifting

The settlement comes amid a broader regulatory recalibration in the U.S. Crypto enforcement actions are being re-evaluated as authorities work toward creating clearer regulatory frameworks. Recently, the SEC dropped lawsuits against Kraken, Consensys, and Cumberland DRW’s crypto arm.

Despite the $200 million blow, Galaxy reported Q4 net income of $174.5 million, down from $301.5 million a year ago. The firm maintains a strong financial position, but the Luna saga underscores the risks of unchecked enthusiasm in the volatile crypto space.