Last week (March 24), Galaxy Digital agreed to pay $200 million to law enforcement agencies to end the investigation. In fact, $200 million is a fine, which is the consideration that will prevent the New York Attorney General from investigating.

I originally wanted to tell you this week how Galaxy used Luna to drive up shipments to deceive his fans? Because I read the documents from the New York Attorney General's office, the investigation into how Galaxy is raised (Pump) and shipped (Dump) is quite careful.

First talk about a detail. The document describes in detail how Mike Novogratz, the CEO of Galaxy, uses tattoos to raise Luna.

On March 26, 2021, Novogratz promised on Twitter that if Luna breaks through $100, he will go and do a Luna tattoo (see picture below).

On December 24, 2021, Novogratz tweeted again, saying that Luna had reached $100 and that he would mark the moment with a cool tattoo. As for how to tattoo? Looking for inspiration (see picture below).

Obviously, on January 4, 2022, he released the tattoo image that caused a fever (see the picture below) on the same day that he sold Luna for an average price of $86.

But his post doesn't mention anything about selling Luna.

How is it? Isn't it shocking? !

A person can be so different from each other,It's really rare, and it's really useless measures to make money. There are other methods that are worse than this, and we will talk about them slowly in the future.

The first thing we need to solve today is a big problem.

Is Galaxy wronged? Novogratz is it?

Do you think this question is strange? I also think it is strange, but there are so many KOLs calling for Novogratz, and why?

1. KOL pleads guilty for Galaxy

Galaxy Digital paid $200 million to terminate the investigation, which is like a bombshell in the crypto circle, attracting strong dissatisfaction from many well-known KOLs. Many people expressed their sympathy and support for Novogratz on Twitter and podcasts, and some even believed that the case was nothing more than a well-designed "judicial kidnapping."

The most influential cry for justice comes from Anthony Scaramucci, founder of SkyBridge Capital.

Scaramucci is known for its sharp words. His injustice also triggered reports from blockchain media, with the title of Cointelegraph's report "NAYG's lawsuit against Galaxy is "pure legal war" - Scaramucci.

Because, he bluntly stated in a tweet on March 28 that the lawsuit is purely "LAWFARE" (legal war), naked judicial bullying!

He said that New York State uses an overly broad law, the Martin Act, that does not require proving the defendant's fraudulent intention to make the company surrender and pay. Sharp words,To the point. This tweet received thousands of retweets and likes overnight and quickly fermented in the encrypted community.

It seems that all the doubts are focused on - the Martin Act - the law, because this law gives the attorney general the privilege of not proving the defendant's fraudulent intention, and because of this law Galaxy has to pay $200 million in "ransomware".

So, what exactly is Scaramucci's Martin Act?

2. Martin Act

To understand why Galaxy Digital is willing to pay $200 million in "reconciliation funds", we must first understand the ins and outs of the "judicial bullying" weapon mentioned by Scaramucci.

This is a law born in 1921 and is known as "the most severe weapon of Wall Street." Now, it is causing a stir in the encrypted circle.

2.1 Why is the Martin Act the most severe?

The Martin Act, officially named New York General Business Law Article 23-A, is one of the first state laws in U.S. history to specifically target securities and commodity market fraud. This law gives the New York Attorney General (NYAG) extensive investigative and prosecution rights, which can investigate all securities and commodity transaction frauds conducted within or from New York State.

The reason why it is called "severe" is because the bill has two key points that are different from the general securities law:

The need to prove that the fraudster has the intention to deliberately deceive investors. But the Martin Act is very different: the New York Attorney General (NYAG) can file a case by simply proving that the defendant's actions may mislead investors. Even if the defendant did not intentionally, it can be considered illegal.

No need to prove specific economic losses

In short, the Martin Act is a highly "preventive" law that gives law enforcement almost absolute initiative.

2.2 Why is there the Martin Act?

In the early 20th century, the US financial market expanded rapidly, and securities fraud incidents occurred frequently. Around 1920, U.S. states passed securities regulatory laws known as the Blue Sky Laws, and New York State was no exception. New York Senator Louis Martin introduced the bill in 1921 after witnessing a large number of people being fraudulent in false securities sales.

The legislative background at that time was very realistic: a large number of investors suffered heavy losses due to false advertising, but it was extremely difficult to provide evidence for fraudulent intentions. Therefore, the Martin Act gives the Attorney General the ability to quickly protect investors with an extremely low threshold for proof. Initially, its role was limited to combating obvious securities scams, and unexpectedly, the subsequent evolution made it far beyond the originally set goals and became the most powerful legal tool in New York State's supervision of financial markets.

2.3 What is special about the Martin Act?

The Martin Act is so powerful mainly in the following three key points:

The unique law enforcement power is concentrated in the Attorney General

The Martin Act does not give ordinary investors private litigation rights, and law enforcement power is completely concentrated in the hands of the New York State Attorney General's Office. Any investor who wants to rely on this law to protect his rights can only make a complaint to the Attorney General, and the official decides whether to initiate an investigation or prosecution. This extremely centralized power structure makes the Martin Act particularly powerful.

The power of investigation is broad and secret

The Attorney General can proactively initiate an investigation without proving reasonable doubt. The investigation process is strictly confidential and can be issued a subpoena to any relevant party for information and anyone who leaks the investigation information may be charged with a misdemeanor.

The penalties are extremely strong

Obliers not only face huge fines, but also may face injunctions or even criminal prosecutions. Recent cases such as the $200 million fine paid by Galaxy Digital and the $450 million fine from the Trump Group reflect the strong penalties of the bill.

Despite its power, the Martin Act has been almost forgotten by the market for decades after its birth. It wasn't until 2002 when Eliot Spitzer became the New York State Attorney General that the long-sleeping law was reawakened.

3. The Martin Act is powerful

If the law also has a personality like a human being, the Martin Act is undoubtedly a very aggressive and enforceable ruthless character. Although it was born a hundred years ago, it was not until the beginning of this century that it truly showed its strength and caused storms on Wall Street again and again, among which the Merrill Lynch case, the global settlement case of the top ten investment banks and the Trump Group case were the most eye-catching.

3.1 Merrill Lynch Case: The fall of the "big short sellers" on Wall Street

The first thing that shocked Wall Street in the Martin Act was the Merrill Lynch Case in 2002. The protagonist of this case was Eliot Spitzer, who had just taken office as New York Attorney General.

In early 2002, the U.S. stock market was in a cold winter after the bursting of the Internet bubble. Investors suffered huge losses, and Wall Street was panicked. At this time, Spitzer decided to take action with Merrill Lynch. He found that Merrill Lynch analyst Henry Blodget had a serious conflict of interest when publishing the analysis report: He publicly recommended investors to buy some technology stocks, but privately described them as "trash" and "worthless" in internal emails.

For example, Merrill Lynch publicly advises customers to buy Infospace, an Internet company, but Brogert privately said, "This company isTrash, absolutely not touched." Similar examples abound. These practices of deceiving retail investors have caused tens of thousands of investors to suffer huge losses.

Spitzer used the advantages of the Martin Act's low threshold for evidence. He did not need to prove whether Brogert was subjectively malicious in deception. He just pointed out that these false propaganda misled the public and could directly take action. Merrill Lynch had no way to argue, and finally had to pay a huge fine of $100 million to settle, and publicly promised to decouple analyst salaries from investment banking business. This action made Merrill Lynch's image plummet, and even made the Martin Act truly feared by Wall Street.

3.2 Global settlement case of the top ten investment banks on Wall Street: a trial of the century that shocked the world finance

2003 In 2018, Spitzer found through investigation that there were serious conflicts of interest in the analysis departments of these major investment banks. In order to win investment banking business, their analysts generally exaggerated the prospect of recommending stocks. Even though they knew the stocks were of low quality, they still encouraged retail investors to buy. For example, at that time, Mary Meeker, an analyst at Morgan Stanley, highly recommended the stock of a technology company called Drugstore.com, which led to a large number of investors following up. However, in an internal email, she privately told her colleagues that the company had a poor prospect and was "not worth investing at all." This remark was later disclosed by Spitzer's team, which aroused great public anger.

With the Martin Act, Spitzer quickly launched a ruthless investigation into these top investment banks. In the end, the top ten investment banks on Wall Street had to give in collectively, reaching a "global settlement" with regulators in 2003, totaling up to $1.4 billion.

Among the specific fines, Goldman Sachs paid $110 million, Merrill Lynch paid another $200 million, and Morgan Stanley paid $125 million. Not only were the investment banks forced to pay huge fines, they also agreed to strictly reform their analysis departments and investment industries.a "firewall" between affairs to eliminate future conflicts of interest.

This case is called "the largest and most influential settlement agreement in Wall Street's history" and is also the pinnacle of the power of the Martin Act. Since then, the conflict of interest between investment bank analysts and investment banking business has become an insurmountable red line on Wall Street, and the entire financial industry is still in fear.

3.3 Trump Group Case: Even a former president cannot escape the sanctions of the Martin Act.

If the Merrill Lynch case and the top ten investment bank cases reflect the power of the Martin Act in the financial world, then the Trump Group Case allows people to see that the Martin Act can even touch the most sensitive figures in the political and business world.

In February 2024, New York Attorney General Letitia James cited the Martin Act to file a lawsuit against former President Trump's business empire, accusing the Trump Group of falsely exaggerating the value of its assets for years in order to obtain more favorable loan terms and insurance terms.

Inquiry shows that the Trump Group has seriously exaggerated the value of its property. For example, the Trump Tower in Manhattan, New York has a real valuation of about $500 million, but when Trump Group applied for a bank loan, it claimed it was worth more than $2 billion! There are dozens of similar incidents, seriously misleading lending banks and investment institutions.

Because the Martin Act does not need to prove whether Trump has subjective fraudulent intentions, it only needs to prove that these exaggerated numbers mislead financial institutions. As a result, a New York court quickly ruled that the Trump Group had committed fraud and imposed a fine of up to $450 million, and Trump and his family business were also restricted to business activities in New York State.

Although Trump himself strongly denied it, in the face of the clear provisions of the Martin Act and the low threshold requirements for evidence, Trump ultimately could only accept the verdict, which caused his business empire to suffer a heavy blow and allowed both the political and business circles to see the ruthlessness and sharpness of the Martin Act.

3.4 Summary: Side effects and controversy of the Martin Act

Through the Merrill Lynch case, the top ten investment bank cases on Wall Street and the Trump Group case, it is not difficult to see that the Martin Act has almost become New York.The Attorney General of the State is the master key to maintaining the order of the financial market. Any misconduct involving securities or financial commodities cannot escape its supervision as long as it occurs within the state of New York.

However, such a wide range of power also brings controversy. It is generally believed that the extremely low law enforcement threshold of the Martin Act may lead to abuse of supervision and affect market innovation capabilities. If a company is not careful, it may become a victim of huge fines.

But I thought: for the crypto market, the Martin Act is like a sword given by heaven.

4. Why is the Martin Act said to be a God-given sword?

Many people may find it strange that the sharp "judicial blade" of the Martin Act often attacks financial companies. Isn't it hindering innovation and harming the market? Many people in the encryption circle even think it is a random "overlord knife" that may hurt innocent people at any time.

But I want to tell you that for the current crypto market, the existence of the Martin Act is a godsend opportunity for industry standardization.

Why do you say so?

In a sentence, use heavy dictionary in troubled times.

4.1 How chaotic is the crypto market?

When it comes to the chaos in the crypto market, even the most optimistic believers have to admit that it is a bit outrageous. In just a few years, the currency circle has become a hard-hit area for global financial fraud, and various shocking scams have emerged like mushrooms after a rain, making it hard to guard against.

Let's look at a few data first:

According to the Federal Trade Commission (FTC) March 2025 report New FTC Data Show a Big Jump in Reported Losses to Fraud to $12.5 Billion in 2024, the losses of cryptocurrency fraud in 2024 were US$1.4 billion, investment fraud accounted for US$5.7 billion, and the total fraud loss reached US$12.5 billion, showing a growth trend. The global data is even more amazing. According to Chainalysis's "2024 Global Crypto Crime Report", the total global crypto fraud in the past year reached US$19 billion, a year-on-year increase of 55%.

The fraud methods are diverse and ever-changing:

The first type is the classic "rug pull".

In early 2022, a malicious project represented by Squid Game Token used popular IP hype, and hyped the currency price tens of thousands of times in just a few days, attracting a large number of retail investors around the world. However, when the coin price reached its peak, the project party instantly cleared the liquidity pool, sweeping away more than US$3.3 million in assets, and investors could only watch the assets cleared. All this process took only a few minutes and caught people off guard.

The second type is the "Pump & Dump" method to manipulate the market.

Luna involved in Galaxy Digital is a typical example. While Novogratz is crazily hyping on social media such as Twitter, he has made Luna into the "next generation stablecoin king", while quietly shipped the goods, which eventually caused retail investors to take over and fall sharply. This technique has been widely used in the industry. According to CoinGecko's 2023 data, more than 60% of emerging cryptocurrencies plummeted within 90 days after they were launched, and a considerable number of them have obvious traces of market manipulation behind them.

The third type is the Ponzi scheme wearing a guise of technology.

The most famous ones are the collapsed Terra/Luna and FTX cases. Terra founder Do Kwon promised up to 20% annual returns through the Anchor agreement, absorbing more than $60 billion in just one year. However, this return is essentially a Ponzi scheme, where new investors' money is used to pay for old investors' returns. Once the capital chain breaks, the entire ecosystem collapses immediately, resulting in millions of investors losing all their money. FTX is even more absurd. Founder Sam Bankman-Fried is a charity star in front of the media camera, but behind it, he uses the funds of his clients to support Alameda Research's speculation, and his market value of $32 billion was wiped out overnight.

In addition to these major cases, retail investors are always facing threats of phishing attacks, hacking and insider trading. PeckShield’s first quarter 2025 report Crypto hacks top $1.6B in Q1 2025 — PeckShield shows that crypto platform hacking losses reached $1.63 billion in Q1 2025, an increase of 131% from $706 million in Q1 2024, involving more than 60 attacks.

The attack methods are diverse. Some hackers steal private keys, some forge smart contracts, and even the project party steals (exit scams), which is jaw-dropping.

Although these hacking incidents are not under the control of the Martin Act and the New York Attorney General, you and I should know that it is precisely because of these attacks that prevent more people from trying to decentralize finance. Hacker attacks are undoubtedly crimes, and they are organized crimes, and some even crimes. We will talk about them specifically the next day.

4.2 Why is the crypto market so chaotic?

The chaos in the crypto market did not arise out of thin air, but was rooted in a deep-seated soil composed of a series of institutional, technical and cultural factors.

The first is the regulatory vacuum.

The crypto market has been running wildly over the speed that regulators imagined, while regulators have reacted so slowly that in a deserted land, scammers, speculators and adventurers have grown wildly. For example, the US SEC and CFTC have long been quarreling about how to define Bitcoin, Ethereum and even various altcoins, which has led to the market always being on the edge of the law. At the end of 2022, when FTX collapsed, Patrick McHenry, chairman of the House Financial Services Committee, lamented: Our slow action on the regulation of crypto markets has allowed scams like FTX to grow and grow.

The second is that the technical threshold is high and the information asymmetry is serious.

Blockchain technology itself is relatively complex, and ordinary investorsIt is difficult to distinguish the authenticity, and the project party and the exchange control most of the key data, and the information is seriously opaque. For example, in the Terra incident, the annualized return of the Anchor agreement was as high as 20%, but the operating model behind it was opaque to the outside world. A large number of retail investors could only believe in celebrities and blindly follow the trend to buy, and eventually became the "last takeover". On the eve of the FTX crash, its founder Sam Bankman-Fried still publicly claimed that "the platform is abundant in funds", but investors cannot obtain real proof of asset reserves. This "black box" model makes the scam extremely easy to implement.

There is once again the moral hazard driven by interests is huge.

The crypto market has extremely high liquidity, and anyone can quickly issue a new currency and go online through the exchange to quickly make money. Data shows that as of April 2025, CoinMarketCap has included more than 13 million cryptocurrencies, but fewer than a hundred of them have real practical application value. Almost all of the other large amounts of currencies belong to "air coins" or "junk coins". Driven by the huge wealth effect, project parties, exchanges and capital parties often collude and manipulate the market.

Furthermore, the media's promotion also contributed to the fire.

Many mainstream media, especially social media, often irresponsibly boast about emerging projects for traffic. For example, Twitter, Reddit, and Telegram groups are filled with paid naval forces and KOLs’ call recommendations, including many publicly manipulated markets. CoinDesk has reported that false promotional content on social media has caused investors more than $1 billion in direct losses in 2023 alone. Many ordinary investors are often unable to distinguish the authenticity of these contents at all, and they become victims after being trusted.

In addition, there is also the misuse of decentralized ideology.

The crypto market is inherently strongly anti-authoritative. It advocates decentralization to create a fairer financial environment, but it is used by a large number of criminals, deliberately evading supervision and evading legal responsibilities. DeFi platforms often use the name of "decentralization", do not provide any project party information, and do not accept audits, so that when user assets are stolen by hackers.At that time, the project party not only did not compensate, but even publicly stated that "decentralization is the user's own risk." This abuse of decentralization has greatly exacerbated market chaos.

Finally, the lack of industry self-discipline and internal regulatory mechanisms has also exacerbated the chaos.

After decades of development, the traditional financial industry has formed a strict self-discipline mechanism and a compliance culture, while the crypto market is completely opposite. Even the leading exchanges Binance and Coinbase are often exposed to problems such as illegal operations and insider trading. In November 2023, Binance and its CEO Zhao Changpeng admitted to money laundering and sanctions violations and paid a fine of more than US$4 billion (DOJ announcement).

To sum up, the reasons behind the chaos in the crypto market are complicated: there are both the problems of backward supervision, as well as the interweaving of factors such as information asymmetry, moral hazard and media fueling. These deep-seated problems have left the entire market in a "wild west" chaos for a long time, creating an excellent profit-making environment for a large number of scammers and speculators.

Of course, it is precisely in this context that the value of the Martin Act is highlighted.

4.3 Why is the Martin Act a sharp sword?

Some people say, "History will not repeat itself, but it is always surprisingly similar." Today's crypto market and the chaos in the stock market a hundred years ago reflect the most classic footnote of this sentence.

We turn the pointer of time back to the early 20th century, when the U.S. stock market was experiencing a chaotic era known as the "Wild West." Just like today's crypto market, Wall Street in that era was full of gold, opportunities and scams followed, and chaos occurred frequently.

At that time, there was no SEC and the perfect securities legal system today, and Wall Street became a paradise for scammers. A large number of market manipulation, insider trading and false propaganda are emerging one after another. One of the most famous manipulators is Jesse Livermore, the "Stock King". In the early 1920s, he used his huge financial advantages to spread false news and join hands with brokerage companies to raise the stock price, and then sold at a high level to cash out. He had stocks in 1929One person made more than $100 million in the disaster (equivalent to billions of dollars today), while tens of thousands of ordinary investors lost all their money overnight.

The securities market at that time was similar to today's encryption circle: without strict legal constraints, all behaviors were in a regulatory gap. A company can issue stocks at will without publishing financial statements, undergoing audits, and not being responsible to investors. Brokerage companies manipulate the market at will, and retail investors are allowed to slaughter them if they are waiting to slaughter the lamb.

Given a famous example: In the early 20th century, many infamous securities fraud cases broke out in the United States, the most typical of which was Charles Ponzi's Ponzi scheme. Ponzi claims he is able to arbitrage through international stamps, giving investors a staggering return of 50% per month. In fact, he just used the money from new investors to pay for the old investors' returns, sweeping over $20 million (equivalent to hundreds of millions of dollars today) in just one year, and the scam collapsed, investors lost all their money, and the market was in chaos.

It is against the backdrop of frequent chaos that states in the United States have successively issued the earliest securities regulatory laws, namely the so-called "Blue Sky Laws", and the Martin Act is the representative bill. It was born in 1921 when the financial market in New York State was the most chaotic and fraudulent incidents occurred. Its original intention was to protect ordinary investors from various securities scams.

The severity and deterrence of the Martin Act soon showed effect in New York State. It strictly regulates the behavior of securities issuers and brokerage companies, and severely punishes false propaganda and misleading investors. In the 1920s and 30s, the Martin Act helped New York State quickly curb rampant securities fraud. Through the rapid and severe handling of several typical cases (such as false oil companies cases and real estate scam cases), the market fraud has rapidly decreased, and the New York securities market has gradually restored order.

In 1934, the United States Federal established the Securities Exchange Commission (SEC) and promulgated the Securities Exchange Act (Securities Exchange Act), which learned from the Blue Sky Law experience, including the Martin Act, and further strengthened the supervision of the securities market at the federal level. It's exactly like thisUnder strong supervision, the US securities market has gradually become the world's most standardized, liquid and credible financial market.

Now, the crypto market is in a wild growth period similar to the securities market in the early 20th century, with 56,000 new cryptocurrencies being born every day, with a total of up to 13.24 million. It is full of innovation and is full of countless hidden dangers and scams. Today's crypto market, like Wall Street back then, urgently needs a "strict regulatory storm" to end its wild growth and enter a track of healthy development.

Indeed, the Martin Act may have a hint of "killing wrongly and not letting go". Its characteristics of low threshold for evidence and high punishment will make many people feel uncomfortable. But history also tells us that a true fair market must be based on strong legal deterrence. For those who wantonly trampled on laws and rules, only severe punishment can be enough to restore order to the market and rebuild the confidence of ordinary investors.

The current chaotic pattern of the crypto market is exactly the same as the wild growth of the stock market in the early stages. Learning from history, we should cherish the Martin Act, a century-old sword. Its normative role in the crypto market is far more important than the temporary "pain".

Conclusion

History does not simply repeat, but always rhymes in amazing ways. A hundred years ago, the Martin Act was born on chaotic Wall Street; a hundred years later, it is being called to save the crypto market that is now muddy.

Some people say: "Supervision is the enemy of innovation", but real history tells us: "Innovation without supervision will eventually become a carnival for liars." The reason why Wall Street has been able to flourish until now is not because of the lack of freedom, but because there has always been a sharp sword of law behind it.

In the financial world, without awe, there is no security; without supervision, there is no future. Although the Martin Act sword is sharp, it cuts off not the path of innovation, but fraud and greed. Law never hinders real innovation, it only clears out scams that disguise as innovation.

A truly valuable free market will not be afraid of the sword of the law.

Although the Martin Act is not omnipotent, in the out-of-control crypto market, it is a sword to protect ordinary investors - imperfect, but must be held tightly.