The recent judicial move by the New York State Attorney General’s (NAYG) against Galaxy Digital concerning its marketing connections to the now-defunct cryptocurrency Terra (LUNA) was unjust and an exploitation of the legal framework, according to SkyBridge Capital and its founder, Anthony Scaramucci.
“This is LAWFARE, plain and simple, due to a little-known yet perilously influential New York statute called the Martin Act,” Scaramucci stated in an X post dated March 28.
Martin Law can “create opportunities for exploitation”
“The statute does not necessitate proof of intent, establishing a minimal burden of proof that can create opportunities for exploitation like this. It should not be in effect,” he remarked.
New York’s Martin Act is one of the most stringent anti-fraud and securities regulations in the United States, empowering prosecutors to follow through with financial fraud cases without the requirement to demonstrate intent. The NAYG asserted that Galaxy Digital breached the Martin Act regarding its purported promotion of Terra, with Galaxy Digital consenting to a $200 million resolution.
As per documents filed by the NAYG on March 24, Galaxy Digital procured 18.5 million LUNA tokens at a 30% discount in October 2020, then advertised them before divesting them while neglecting disclosure requirements.
Scaramucci emphasized that Galaxy CEO Michael Novogratz genuinely believed that all statements regarding Luna were accurate, as he had been misled by Terraform Labs and its previous CEO, Do Kwon.
Source: Amanda Fischer
In the meantime, MoonPay’s enterprise president, Keith Grossman, remarked that he had never encountered the Martin Act and needed to search for it using the AI chatbot ChatGPT.
“It is overly expansive and essentially epitomizes lawfare,” Grossman declared. “Sorry you got entrapped in its crosshairs, Mike,” he added.
Related: Sonic launches high-yield algorithmic stablecoin, rekindling Terra-Luna ‘PTSD’
The filing claimed that Galaxy facilitated a “little-known” token, referring to LUNA, to elevate its market value from $0.31 in October 2020 to $119.18 in April 2022 while “gaining profits in the hundreds of millions of dollars.”
Asset manager and investor Anthony Pompliano indicated he wasn’t acquainted with the intricacies of the lawsuit but endorsed Novogratz, deeming him a “good man” who has invested considerable time and resources into aiding others.
The collapse of Terra stands as one of the most notorious failures in the cryptocurrency sector. In March 2024, SEC attorney Devon Staren stated in the US District Court for the Southern District of New York that Terra was a “house of cards” that fell apart for investors in 2022.
Magazine: Arbitrum co-founder skeptical of the shift to based and native rollups: Steven Goldfeder
