On March 24, 2025, Galaxy Digital agreed to pay a $200 million settlement to the New York Legal professional Basic’s Workplace to conclude an investigation into its involvement with the Luna cryptocurrency. This sum serves as a penalty, successfully a worth to halt the NYAG’s probe.
Initially, I supposed to debate how Galaxy allegedly used Luna to defraud its supporters by inflating its worth after which promoting off holdings. The NYAG’s paperwork present detailed insights into Galaxy’s simultaneous promotion and liquidation of Luna.
One notable element is how Mike Novogratz, Galaxy’s CEO, used a tattoo to advertise Luna.
- March 26, 2021: Novogratz tweeted that he would get a Luna tattoo if its worth surpassed $100.
- December 24, 2021: He introduced on Twitter that Luna had reached $100 and he was searching for inspiration for a “cool tattoo” to commemorate the milestone.
- January 4, 2022: On the identical day he offered 165,000 Luna tokens at a median worth of $86, Novogratz posted a photograph of his new Luna tattoo, which sparked widespread enthusiasm.
Nevertheless, he didn’t point out his sale of Luna in these posts.
This raises questions on such contradictory conduct and the lengths people may go for monetary achieve. Extra regarding practices can be mentioned sooner or later.
The urgent query is:
Is Galaxy being handled unfairly? Did Novogratz deceive buyers?
Whereas this may occasionally appear odd, quite a few Key Opinion Leaders (KOLs) have voiced help for Novogratz.
Galaxy Digital’s $200 million settlement has despatched shockwaves via the crypto group, eliciting sturdy reactions from distinguished KOLs. Many have expressed sympathy and help for Novogratz on platforms like Twitter and podcasts, with some labeling the case as a type of “judicial extortion.”
Essentially the most notable protection comes from Anthony Scaramucci, founding father of SkyBridge Capital, recognized for his sharp rhetoric. His feedback have attracted media consideration, with Cointelegraph headlining: “NAYG lawsuit towards Galaxy was ‘lawfare, pure and easy’ — Scaramucci.”
On March 28, Scaramucci tweeted that the lawsuit was purely “lawfare,” a blatant act of judicial bullying. He criticized New York State’s use of the overly broad Martin Act, which permits the Legal professional Basic to behave with out proving fraudulent intent, compelling firms to settle. This tweet shortly garnered hundreds of retweets and likes, sparking widespread dialogue within the crypto group.
The controversy facilities on the Martin Act, which grants the Legal professional Basic particular privileges to behave with out proving fraudulent intent, resulting in Galaxy’s $200 million “ransom.”
So, what precisely is the Martin Act that Scaramucci refers to?
To grasp why Galaxy Digital agreed to a $200 million settlement, it’s important to understand the origins and implications of the Martin Act, described by Scaramucci as a instrument of “judicial bullying.”
Enacted in 1921, the Martin Act, formally generally known as New York Basic Enterprise Regulation Article 23-A, is taken into account one among Wall Avenue’s most stringent weapons and is now inflicting a stir within the crypto world.
The Martin Act grants the New York Legal professional Basic (NYAG) in depth investigative and prosecutorial powers over securities and commodities fraud inside the state. Its severity stems from two key facets:
- No Have to Show Fraudulent Intent (Scienter): In contrast to typical securities fraud instances that require proof of intent to deceive, the Martin Act permits the NYAG to proceed if a defendant’s actions have the potential to mislead buyers, no matter intent.
- No Requirement to Present Particular Financial Loss: Beneath the Martin Act, the NYAG can intervene even when buyers haven’t suffered precise monetary hurt, so long as the conduct in query may mislead the general public.
In essence, the Martin Act is a extremely “preventive” regulation, granting regulation enforcement near-absolute proactive authority.
Within the early Twentieth century, because the U.S. monetary markets expanded quickly, securities fraud turned rampant. Round 1920, states started enacting “Blue Sky Legal guidelines” to manage securities markets. New York State Senator Louis Martin, witnessing widespread investor deception via false securities promotions, launched the Martin Act in 1921.
The regulation aimed to guard buyers swiftly, given the issue of proving fraudulent intent. Initially concentrating on blatant securities scams, the Martin Act has developed into New York’s most potent monetary regulatory instrument.
The Martin Act’s energy is clear in three important areas:
- Focus of Enforcement Authority: In contrast to different legal guidelines that enable non-public lawsuits, the Martin Act centralizes enforcement solely inside the NYAG’s workplace. Buyers searching for redress should depend on the Legal professional Basic’s discretion to analyze or prosecute.
- Broad and Confidential Investigative Powers: The NYAG can provoke investigations with out prior proof of wrongdoing, sustaining strict confidentiality. Subpoenas may be issued to any related events, and leaking details about an investigation can result in misdemeanor expenses.
- Extreme Penalties: Violators face substantial fines, injunctions, and potential legal expenses. Latest examples embrace Galaxy Digital’s $200 million penalty and the Trump Group’s $450 million advantageous, highlighting the Act’s formidable enforcement capabilities.
Regardless of its energy, the Martin Act remained comparatively dormant for many years till revived by Eliot Spitzer in 2002 throughout his tenure as NYAG.
If legal guidelines had personalities, the Martin Act would undoubtedly be an aggressive and forceful character. Although enacted over a century in the past, it was not till the early twenty first century that it absolutely revealed its energy, repeatedly shaking up Wall Avenue. Essentially the most notable instances embrace the Merrill Lynch scandal, the worldwide settlement with the ten largest funding banks, and the Trump Group case.
The primary time the Martin Act actually rocked Wall Avenue was in 2002, with the Merrill Lynch case. The central determine behind the prosecution was Eliot Spitzer, who had simply assumed workplace because the New York Legal professional Basic.
In early 2002, the U.S. inventory market was reeling from the burst of the dot-com bubble, leaving buyers with huge losses and the general public in a state of worry. It was right now that Spitzer set his sights on Merrill Lynch. He found that Henry Blodget, one of many agency’s high analysts, was engaged in extreme conflicts of curiosity: whereas publicly recommending sure tech shares to retail buyers, he was privately calling them “junk” and “nugatory” in inner emails.
For instance, Merrill Lynch suggested its shoppers to purchase inventory within the web firm Infospace, however Blodget described it in non-public emails as “a bit of crap to not be touched.” Such examples had been quite a few. These deceptive actions induced vital hurt to numerous retail buyers.
Utilizing the Martin Act’s low burden of proof, Spitzer didn’t must show Blodget’s intent to defraud — he merely needed to reveal that the deceptive info had the potential to deceive the general public. Merrill Lynch had no approach to mount a protection and finally agreed to pay a $100 million advantageous and promised to reform its practices by separating analyst compensation from funding banking income. The agency’s popularity was irreparably broken, and the Martin Act was now firmly feared on Wall Avenue.
However Spitzer’s ambitions didn’t cease with Merrill Lynch. Subsequent, he set his sights on the core of Wall Avenue — its ten strongest funding banks, together with Goldman Sachs, Morgan Stanley, and Citigroup.
In 2003, Spitzer’s investigations revealed that conflicts of curiosity had been widespread inside these banks’ analysis divisions. Analysts routinely exaggerated inventory prospects to draw funding banking offers, even once they privately admitted that these shares had been nugatory.
As an example, Mary Meeker, an analyst at Morgan Stanley, closely promoted the inventory of the tech firm Drugstore.com, main many buyers to comply with her recommendation. But, in non-public emails revealed later by Spitzer’s group, she expressed doubts in regards to the firm’s outlook, stating that it “was not price investing in.” The general public was outraged upon studying of those inner discrepancies.
Armed with the Martin Act, Spitzer launched an unrelenting investigation. Ultimately, all ten funding banks had been pressured to concede. In 2003, they reached a “international settlement” with regulators, totaling $1.4 billion in penalties.
Particular penalties included $110 million from Goldman Sachs, an extra $200 million from Merrill Lynch, and $125 million from Morgan Stanley. Past monetary penalties, the banks had been compelled to implement strict reforms to separate their analysis and funding banking operations, establishing an institutional “firewall” to stop future conflicts of curiosity.
This case, widely known as the biggest and most impactful monetary settlement in Wall Avenue historical past, marked the Martin Act’s second of peak affect. From then on, conflicts of curiosity between analysts and bankers turned an untouchable crimson line — one which continues to hang-out the monetary business right now.
Whereas the Merrill Lynch and high ten banks instances demonstrated the Martin Act’s energy over Wall Avenue, the Trump Group case confirmed that it may attain even essentially the most politically delicate figures.
In February 2024, New York Legal professional Basic Letitia James invoked the Martin Act to sue former President Donald Trump’s enterprise empire. The Trump Group was accused of persistently and grossly inflating asset values to safe favorable mortgage phrases and insurance coverage insurance policies.
Investigations revealed that the corporate had wildly overstated property values. As an example, the Trump Tower in Manhattan was reportedly valued at round $500 million, but the Trump Group advised banks it was price over $2 billion. Dozens of comparable incidents had been uncovered, severely deceptive monetary establishments.
As a result of the Martin Act doesn’t require proof of intent, however merely the potential to mislead, the court docket swiftly dominated that the Trump Group had dedicated fraud. The penalty was $450 million, and Trump alongside along with his household companies was restricted from conducting business actions in New York State.
Though Trump strongly denied the costs, he may do little towards the Martin Act’s clear provisions and low evidentiary threshold. The judgment dealt a heavy blow to his enterprise empire and despatched a chilling message throughout political and monetary circles in regards to the Martin Act’s relentless attain.
Via the Merrill Lynch case, the worldwide funding financial institution settlement, and the Trump Group swimsuit, it turns into clear that the Martin Act has change into the Legal professional Basic’s final instrument for policing New York’s monetary markets. Any improper conduct associated to securities or monetary merchandise inside the state is unlikely to flee its web.
Nevertheless, with such sweeping powers come critical issues. Many within the monetary business imagine that the Act’s low enforcement threshold might result in regulatory overreach, stifling innovation and subjecting firms to huge penalties for minor infractions.
That mentioned, I imagine that — with regards to the cryptocurrency market — the Martin Act could be a godsend.
Some might discover it unusual that such a harsh authorized weapon, one which strikes so closely at monetary companies, might be seen as something however a risk to innovation. Many within the crypto group view the Martin Act as a “warlord’s blade,” one which swings wildly and dangers harming the harmless.
However I wish to provide a unique perspective: in right now’s chaotic crypto panorama, the Martin Act could also be nothing in need of a divine alternative to carry order and legitimacy to the business.
Why do I say this?
In a single phrase: extraordinary instances name for extraordinary measures.
Even essentially the most optimistic believers should admit that the crypto market is wildly chaotic. In only a few quick years, the house has change into a hotspot for international monetary fraud. A staggering number of scams have emerged, lots of which depart buyers defenseless.
Let’s have a look at some information:
In line with the FTC’s March 2025 report (New FTC Knowledge Present a Large Bounce in Reported Losses to Fraud to $12.5 Billion in 2024), crypto-related scams resulted in $1.4 billion in losses in 2024, whereas funding scams accounted for $5.7 billion. The whole fraud losses hit $12.5 billion, exhibiting a pointy upward development.
Globally, the numbers are much more alarming. Chainalysis’ 2024 Crypto Crime Report states that international crypto fraud reached $19 billion, a 55% year-over-year enhance.
The sorts of scams are continuously evolving. Listed below are just a few main ones:
(1) The Basic “Rug Pull”
In early 2022, the Squid Recreation Token exploited a viral IP to pump its worth tens of hundreds of instances inside days. On the peak, the undertaking’s creators out of the blue withdrew all liquidity, vanishing with over $3.3 million in belongings. Buyers watched helplessly as their holdings went to zero — all in mere minutes.
(2) Pump-and-Dump Schemes
Luna, the token concerned in Galaxy Digital’s controversy, is a first-rate instance. Mike Novogratz promoted Luna closely on Twitter, branding it because the “next-generation stablecoin king.” In the meantime, he was quietly promoting his holdings. Retail buyers had been left to carry the bag after the value crashed. In line with CoinGecko’s 2023 information, over 60% of recent crypto tokens crashed inside 90 days of launch — many because of apparent market manipulation.
(3) Ponzi Schemes Disguised as Innovation
Essentially the most notorious examples are Terra/Luna and FTX.
- Terra’s founder Do Kwon promised 20% annual returns by way of the Anchor Protocol, attracting over $60 billion in deposits in a single 12 months. However the system operated like a Ponzi scheme: new buyers’ funds had been used to pay outdated ones. When inflows stopped, the whole ecosystem collapsed — hundreds of thousands of buyers misplaced every thing.
- FTX was much more absurd. Founder Sam Bankman-Fried appeared in media as a philanthropic genius, but behind the scenes, he misused shopper funds to help dangerous trades by Alameda Analysis. When the reality got here out, the $32 billion trade evaporated in a single day.
Moreover these headline instances, retail buyers continuously face phishing assaults, insider buying and selling, and hacks. In line with PeckShield’s Q1 2025 report (Crypto hacks high $1.6B in Q1 2025 — PeckShield), hacking losses totaled $1.63 billion, a 131% enhance from Q1 2024, involving over 60 main incidents.
These hacks may be past the Martin Act’s attain, however they’re a part of the identical disaster that deters hundreds of thousands from attempting decentralized finance. Make no mistake — these are crimes, typically coordinated and generally even backed by state actors. We are going to cowl that intimately one other time.
The mess in crypto didn’t come up from nowhere. It stems from a tangle of regulatory gaps, technical complexity, ethical hazard, and a tradition that resists oversight.
First, a Regulatory Vacuum
Over the previous decade, crypto has grown at a tempo regulators couldn’t sustain with. Companies just like the SEC and CFTC have lengthy debated whether or not Bitcoin, Ethereum, and different altcoins are commodities or securities, leaving the market in a authorized grey zone.
When FTX collapsed in late 2022, Patrick McHenry, chair of the U.S. Home Monetary Providers Committee, lamented, Our gradual response enabled a rip-off like FTX to develop unchecked.
Second, Technical Complexity and Uneven Data
Blockchain is complicated. Most buyers can’t assess undertaking high quality, whereas insiders and exchanges management virtually all important information.
In Terra’s case, Anchor’s 20% APY appeared irresistible, however the mechanism behind it was opaque. Retail buyers adopted influencer endorsements blindly — and had been the final to exit.
Simply earlier than FTX’s collapse, Sam Bankman-Fried publicly claimed the trade was solvent. Buyers had no approach to confirm reserves. This type of black field atmosphere makes scams straightforward to execute.
Third, Ethical Hazard Pushed by Revenue
Crypto liquidity is excessive. Anybody can launch a token, get listed, and money out shortly.
As of April 2025, CoinMarketCap lists over 13 million tokens, however fewer than 100 have actual utility. The remaining are principally “junk cash” or “air cash.” With enormous wealth at stake, undertaking groups, exchanges, and capital typically collude to control markets.
Fourth, Media Amplification
Mainstream and social media typically hype tasks irresponsibly for views and income.
Twitter, Reddit, and Telegram are stuffed with paid shills and influencers pumping cash. In line with CoinDesk, false promotions on social media induced buyers over $1 billion in direct losses in 2023 alone.
Most retail customers can’t discern real evaluation from manipulation.
Fifth, Misuse of Decentralization Beliefs
Crypto’s anti-authoritarian spirit has been weaponized. Many DeFi tasks refuse to reveal group identities or bear audits, hiding behind decentralization.
When customers lose funds to hacks, these tasks typically refuse compensation, citing “decentralization means consumer danger.” This ideological abuse fuels dysfunction.
Lastly, Lack of Business Self-Self-discipline
Conventional finance developed sturdy compliance cultures over many years. Not so in crypto.
Even high exchanges like Binance and Coinbase face common allegations of insider buying and selling and misconduct. In November 2023, Binance and CEO Changpeng Zhao admitted to cash laundering and sanctions violations, paying over $4 billion in fines (DOJ report).
Taken collectively, the chaos of crypto stems from a fancy interaction of gradual regulation, opaque information, profit-driven actors, and ideological cowl. These elements flip the market right into a “Wild West” — an ideal looking floor for scammers.
And it’s exactly on this context that the Martin Act’s true worth turns into clear.
There’s an outdated saying: “Historical past doesn’t repeat itself, nevertheless it typically rhymes.” The chaos we see in right now’s crypto markets mirrors virtually precisely the dysfunction of the early Twentieth-century U.S. inventory market — proving this maxim as soon as once more.
Allow us to rewind the clock to the early 1900s. At the moment, the American inventory market was experiencing what was later dubbed the “Wild West” period. Very like right now’s crypto markets, Wall Avenue again then was flush with gold, brimming with alternative — and riddled with scams. The atmosphere was a free-for-all.
There was no SEC, no standardized securities legal guidelines, and no authorized constraints. Wall Avenue turned a haven for fraudsters. Market manipulation, insider buying and selling, and pretend promotions had been rampant.
Probably the most notorious manipulators was “The Boy Plunger,” Jesse Livermore. Within the early Twenties, he leveraged his huge capital to unfold false information, collude with brokers to drive up inventory costs, after which dumped his holdings on the high. Throughout the 1929 crash, Livermore revamped $100 million (price a number of billion right now), whereas hundreds of thousands of atypical buyers misplaced their life financial savings in a single day.
The securities market at the moment resembled right now’s crypto market: no necessary disclosure, no auditing, and no accountability to buyers. Corporations may situation inventory freely, with no requirement to publish monetary statements. Brokers may manipulate costs at will. Retail buyers had been little greater than sheep to be slaughtered.
A well-known instance from that period is Charles Ponzi’s scheme. He promised buyers a 50% month-to-month return via a postal coupon arbitrage operation. In actuality, it was a traditional Ponzi setup: utilizing new buyers’ cash to repay earlier ones. Inside a 12 months, he amassed over $20 million (a whole lot of hundreds of thousands in right now’s {dollars}). When the scheme collapsed, the fallout was devastating.
It was on this lawless atmosphere that states throughout the U.S. started to introduce a few of the earliest securities legal guidelines — generally known as Blue Sky Legal guidelines. The Martin Act, enacted in 1921, was New York’s response. It was born throughout one of the crucial fraudulent, unregulated intervals within the state’s monetary historical past, designed to guard on a regular basis buyers from predatory scams.
The Martin Act shortly made an impression. It imposed strict requirements on inventory issuers and brokers, punished false promoting and misleading conduct harshly, and signaled a brand new period of accountability.
Throughout the Twenties and Nineteen Thirties, it was used to crack down on fraudulent oil firms, actual property scams, and different main schemes. These swift and extreme actions helped restore order to New York’s markets.
Then, in 1934, the U.S. Securities and Alternate Fee (SEC) was established, and the Securities Alternate Act was handed, drawing on the experiences of the Martin Act and different state-level legal guidelines to implement regulation on the federal degree.
That sturdy regulatory basis is what helped form the U.S. inventory market into what it’s right now: essentially the most liquid, clear, and trusted capital market on this planet.
Now, have a look at right now’s crypto house. We’re as soon as once more in a time of explosive, unchecked development. A median of 56,000 new tokens are created every single day. The whole variety of crypto belongings exceeds 13.24 million. Whereas innovation prospers, scams run simply as wild.
On this panorama, we’re as soon as once more in determined want of a powerful regulatory sword to carry an finish to the chaos and permit the house to mature.
Sure, the Martin Act is strict — even unforgiving. Its low burden of proof and heavy penalties make many uncomfortable. But when historical past has taught us something, it’s that true market equity should be constructed on the again of authorized deterrence. Those that recklessly violate guidelines will solely reply to actual penalties.
Crypto’s present dysfunction echoes the early days of the inventory market. By studying from historical past, we should always acknowledge the Martin Act as a century-old sword — flawed, maybe, however highly effective and mandatory. It may possibly slash via fraud and deceit to make room for actual, lasting innovation.
Historical past doesn’t merely repeat — it rhymes in exceptional methods.
100 years in the past, the Martin Act was born within the chaos of Wall Avenue; a century later, it’s being summoned once more to rescue the crypto market now drowning in a tide of scams and dysfunction.
Some declare, “Regulation is the enemy of innovation.” However historical past tells us in any other case: with out regulation, innovation turns into a playground for fraud. Wall Avenue’s enduring prosperity isn’t the results of unbridled freedom, however of the sharp authorized sword standing guard behind it.
On the earth of finance, there may be no security with out reverence, no future with out regulation. The Martin Act could also be a blunt instrument — it’s sharp, and it cuts deep — however what it severs isn’t the trail of innovation, however the vines of deception and greed. Regulation doesn’t hinder true innovation; it solely clears the way in which by slicing down those that masquerade as innovators.
A very helpful free market doesn’t worry the sword of justice.
The Martin Act is probably not excellent, and it is probably not the reply to each downside, however in an business spinning uncontrolled, it stays a blade that protects the atypical investor — flawed, sure, however important.