BitGo CEO backs crypto oversight after Galaxy Digital’s $200M settlement

BitGo CEO Mike Belshe has voiced strong support for enhanced regulation within the cryptocurrency industry. This comes ​in the wake of Galaxy Digital’s recent $200 million settlement with the New York Attorney General (NYAG).

Belshe claims that the foundation of his regulation argument is based on the belief that sufficient oversight is the most effective way to address industry problems that might result in overregulation.

Belshe condemns Galaxy Digital’s actions, warns of industry-wide consequences

In response to a post from SkyBridge Capital founder Anthony Scaramucci, Belshe noted that denying NYAG’s strong case against Galaxy Digital was difficult.

BitGo’s CEO criticized the company’s pump-and-dump tactics, stating that selling tokens immediately after they vest while publicly promoting them as a long-term hold is unethical.

Interestingly, he reaffirmed his admiration for Novogratz, CEO of Galaxy Digital, and his industrial contributions. However, Belshe stated Galaxy Digital’s actions were unethical in light of the NYAG’s policies.

He said that whether or not it was an overreach of the law, and that kind of behavior damaged the reputation of their entire industry. 

Therefore, Belshe argued that if left unchecked, it could result in over-regulation and urged users to read the controls placed on Galaxy as part of that settlement.

Galaxy Digital settles with NYAG for $200M over Luna promotion controversy

The NYAG filed a complaint accusing the Galaxy Digital investment firm of breaking the law by advertising an asset without revealing its intention to sell it. According to the filing, Galaxy did not acknowledge or deny wrongdoing during the transaction.

According to Galaxy’s earnings statement released recently, the company and the state authority reached a settlement on March 27 to settle civil claims about specific investments, trading, and public statements it made about Luna between late 2020 and 2022.

To illustrate, in 2020, Galaxy and Novogratz started promoting Terraform Labs’ Luna cryptocurrency, which was designed primarily to use algorithmic trading to support the value of its sister coin, TerraUSD. 

Later, in mid-2022, the market value of both tokens declined sharply to almost nothing, wiping out over $40 billion.

As part of a settlement with the New York Attorney General, Michael Novogratz’s Galaxy Digital Holdings was given a $200 million penalty to pay for the investment firm’s involvement in promoting the failed Luna cryptocurrency.

The $200 million undiscounted monetary penalty will be paid in installments until 2028. Noting the effect of discounting, Galaxy’s full-year results on March 28 included a $166 million legal provision to cover the fine.

Novogratz said the decision was difficult, and they had to consider it carefully. He highlighted that Galaxy had cooperated completely with regulators, including the New York Attorney General, over the past few years.

He added that the unethical practices they were accused of resulted from the deceit of Luna’s founders, Do Kwon and Terraform, acknowledging that they misled them and several other well-known institutional investors.

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