Source: Cointelegraph Original: "{title}"
The recent lawsuit filed by the New York Attorney General (NAYG) against Galaxy Digital regarding its promotional relationship with the now-collapsed cryptocurrency Terra (LUNA) is unfair and an abuse of the legal system, said SkyBridge Capital founder Anthony Scaramucci. "This is pure 'warfare litigation,' due to a vague but powerful law in New York— the Martin Act," Scaramucci stated in an X post on March 28.
"This law does not require proof of intent and sets a low evidentiary threshold, which can lead to abuses like this. It should not exist," he said.
New York's Martin Act is one of the strictest anti-fraud and securities laws in the United States, allowing prosecutors to pursue financial fraud cases without proving intent. The New York Attorney General (NAYG) accused Galaxy Digital of violating the Martin Act for allegedly promoting Terra, ultimately leading Galaxy Digital to agree to pay a $200 million settlement.
According to documents submitted by the NAYG on March 24, Galaxy Digital purchased 18.5 million LUNA tokens at a 30% discount in October 2020 and then promoted and sold these tokens without adhering to disclosure rules.
Scaramucci reiterated that Galaxy's CEO Michael Novogratz believed everything he said about LUNA was true at the time because he was misled by Terraform Labs and its former CEO Do Kwon.
Source: Amanda Fischer
Meanwhile, Keith Grossman, president of MoonPay's enterprise division, stated that he had never heard of the Martin Act and had to look up relevant information through the AI chatbot ChatGPT.
"It’s very broad, essentially the nature of legal warfare," Grossman said. "Sorry you got caught up in this mess, Mike," he added.
The lawsuit claims that Galaxy helped a "little-known" token (referring to LUNA) raise its market price from $0.31 in October 2020 to $119.18 in April 2022, while "making hundreds of millions in profits."
Asset manager and investor Anthony Pompliano stated that he is not very familiar with the specifics of the lawsuit but defended Novogratz, calling him a "good guy" who has invested a lot of time and money to help others.
The collapse of Terra is one of the most notorious failures in the cryptocurrency industry. In March 2024, SEC attorney Devon Staren stated in the U.S. District Court for the Southern District of New York that Terra was a "house of cards" that collapsed on investors in 2022.
Related: Experts: The U.S. needs to establish stablecoin rules before cryptocurrency tax reform.
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