Cointelegraph reports that the New York State Attorney General (NAYG) has filed a lawsuit against Galaxy Digital over its promotional activities related to the now-defunct cryptocurrency Terra (LUNA). This legal action has drawn criticism from SkyBridge Capital founder Anthony Scaramucci, who called it an unfair use of the legal system. In a March 28 post on X, Scaramucci referred to the lawsuit as “LAWFARE,” citing concerns over the Martin Act—a powerful New York law that he believes is prone to misuse.
Regarded as one of the strictest anti-fraud and securities laws in the U.S., the Martin Act allows prosecutors to pursue financial fraud cases without needing to prove intent. The NAYG alleges that Galaxy Digital violated this law by promoting Terra, leading to a $200 million settlement. According to legal documents filed on March 24, Galaxy Digital purchased 18.5 million LUNA tokens at a 30% discount in October 2020 and subsequently promoted and sold them without proper disclosure.
Anthony Scaramucci defended Galaxy Digital CEO Michael Novogratz, asserting that Novogratz genuinely believed his statements about Luna were accurate, as he had been misled by Terraform Labs and its former CEO, Do Kwon. Meanwhile, Keith Grossman, president of enterprise at MoonPay, admitted he was unfamiliar with the Martin Act and turned to AI chatbot ChatGPT for clarification. Grossman described the law as broad and reflective of the concept of lawfare, expressing sympathy for Novogratz’s situation.
The lawsuit claims that Galaxy Digital contributed to LUNA’s price surge from $0.31 in October 2020 to $119.18 in April 2022, profiting substantially in the process. Asset manager and investor Anthony Pompliano, while not fully aware of the case’s details, vouched for Novogratz’s character, calling him a “good man” dedicated to philanthropy. Terra’s collapse remains one of the most infamous failures in cryptocurrency history. In March 2024, SEC attorney Devon Staren described Terra as a “house of cards” during proceedings in the US District Court for the Southern District of New York, emphasizing the severe losses investors faced in 2022.
