Galaxy Digital Slapped With $200 Million Fine 💸

💰 Galaxy Digital to pay $200M for Terra blunder, 🪼Hyperliquid to compensate JELLY traders with an “advantageous” offer.

Author

Adrian Zmudzinski
March 28, 2025

Hi! In today’s edition:

  • 💸 Galaxy to pay $200 million over Terra involvement 

  • 🪼 Hyperliquid to compensate JELLY traders

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By Tikta

Galaxy Slapped With $200 Million Fine Over Luna ‘Manipulation’ and ‘Fraud’

New York Attorney General Letitia James has fined Galaxy Digital and several subsidiaries collectively $200 million in disgorgement over three years because of its failure to disclose its sale of Luna tokens while it was promoting them to the public.

An Assurance of Discontinuance filed Monday on the NYAG’s website revealed that the AG had begun an investigation into market manipulation by Galaxy Digital Holdings, Ltd. and related entities for violation of the Martin Act, which prohibits fraudulent practices related to the purchase, sale, promotion and advertisement of securities and commodities. (According to definitions of the Martin Act, the AG filing states LUNA would be considered both a security and a commodity.)

Although Galaxy and the other defendants named in the Assurance did not admit or deny the AG’s findings, they agreed not to violate any applicable laws. For instance, they agreed to refrain from making favorable public statements about a cryptocurrency in exchange for compensation or other benefit without full disclosures, among other requirements.

In addition, the monetary relief Galaxy will pay to the state of New York is $40 million with 15 days of the filing on March 24th, $40 million within one year of that date, $60 million within two years, and $60 million within three years.

Galaxy Digital did respond to a request for comment by press time.

Galaxy’s Sweet Deal

In August 2020, Terraform Labs was looking for a “good advocate in the west,” so it made an offer to Galaxy’s ventures team: Galaxy could receive a preferential deal if it agreed to promote the token publicly. During their negotiations Terraform Labs cofounder Do Kwon revealed that the most generous offer had been for a 30% discount with a 12-month lockup.

What Galaxy was able to get was far sweeter: it would receive 18 million tokens over the course of a year, in monthly tranches, at a price of $0.22, representing a 30% discount on the market price with the tokens vesting monthly as well. This meant Galaxy would be able to sell the tokens they received every month.

Read more here on how Galaxy and its founder and CEO Mike Novogratz promoted LUNA while also selling into the public markets without disclosure as the token rose in value to almost $120.

Hyperliquid to Compensate JELLY Traders, Tighten Risk Management

Decentralized exchange Hyperliquid plans to refund traders who were long JELLYJELLY at an “advantageous” closing price of $0.037555, the team said on Thursday.

The plan comes after a trader executed a complex strategy that led to a short squeeze, putting Hyperliquid's liquidity provider vault at risk of losing over $12 million. 

New risk management measures will ensure that the Liquidator vault will have tighter controls and trigger ADL (automatic deleveraging) when losses exceed specific thresholds.

Hyperliquid also said that dynamic Open Interest (OI) caps will now be more closely tied to global liquidity and OI on other venues to prevent excessive risk exposure. This includes preventing positions that might exceed certain liquidity thresholds.

The team doubled down on its decision to delist JELLY perpetual futures contracts despite backlash from some over the protocol’s apparent lack of decentralization.

“Validators will vote onchain to delist assets that fall beneath thresholds,” they said.

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