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Happy Friday. 

We’ve had a news-filled week and we’re ending it with yet another big story, this time concerning Do Kwon, Galaxy and Michael Novogratz.

We’re also curious to get your take on the second quarter given that Q1 didn’t go so well despite the potential positives on the horizon. 

See you bright and early Monday.

🌙 Lunar landing

Michael Novogratz’s Galaxy was ordered to pay $200 million to the state of New York after being accused of market manipulation. 

According to a new legal filing, the firm allegedly manipulated the price of LUNA. LUNA, for those new to the crypto space, was tied to the now-infamous algorithmic stablecoin TerraUSD which lost the crypto industry billions.

Back in 2020, per the filing, Terra founder Do Kwon sought out Galaxy to help purchase and promote LUNA tokens. 

The offer from Terra was simple: a 30% discount to market price, with tokens vesting monthly over the next year. Galaxy received a total of 18 million tokens, with Terra handing over 1/12 of those each month during that timespan. 

“Galaxy bought more than 18.5 million LUNA from Terraform in October 2020 at $0.22 per token, a nearly 30% discount to LUNA’s then-market price of $0.31 and began endorsing Luna,” the filing said. 

Friday’s filing claims that Galaxy and Luna went back and forth before beginning their business relationship, given that Galaxy sought to understand any potential use cases for LUNA. 

“Galaxy met with Terraform’s co-founders, reviewed Terraform’s public materials — including its white papers and public posts, spoke to node operators to confirm blockchain activity, reviewed blockchain data on the Terra blockchain explorer, and conducted background checks on Terraform’s co-founders,” the document said. But Galaxy quickly found out that there weren’t any real applications for LUNA.

Galaxy’s “Vice President explained that this was better than prior deals Terraform had offered to other investors. It meant Galaxy would be able to sell its LUNA when it received them each month.”

The signed agreement has Galaxy investing $4 million in exchange for a 30% discount to the spot price of LUNA — which was around $0.31 at the time. In total, Galaxy purchased 18,513,120 LUNA at $0.22 per token.

Lawyers alleged in the filing that Novogratz was quick to start endorsing LUNA, misleading investors into thinking that they could make LUNA transactions on payment platform Chai, which wasn’t true. Through the press, Novogratz continued to promote LUNA and the price quickly started to climb. 

“On March 2, 2021, Terraform issued the fourth tranche of 1,542,764 LUNA to Galaxy, and on March 3, Galaxy sold all 1,542,764 LUNA at prices between $7.35 and $7.70.”

“Galaxy helped a little-known token increase its market price from $0.31 in October 2020 to $119.18 in April 2022,” the filing said. 

But despite what seemed like very enthusiastic support from the firm and its head, it was quietly offloading its tokens. And when I say enthusiastic, I mean that Novogratz even sports a LUNA tattoo.

Ironically, the same day that Novogratz posted about his tattoo, Jan. 4, 2022, Galaxy allegedly sold 165,350 LUNA at prices between $84.91 and $88.51.

Galaxy Digital didn’t respond to a request for comment about this filing.

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Even if the IPO market is ready to welcome crypto companies with open arms which I think could be the case in a matter of months — there are still big hurdles for crypto companies. That boils down to two things: Do the banks bringing the firm public understand what they do? And, on top of that, what’s the best comparison to make?

The first question is much easier to answer, given that big banks and other financial institutions had a huge presence at the Digital Assets Summit last week and crypto is no longer the small niche it used to be. I’m not saying they’re crypto native by any means, but they understand a lot of what’s happening. 

The second part is trickier, though. 

Remember how I mentioned yesterday that the media likes to make comparisons? Well, so does everyone, especially when investors are looking at an IPO. While S-1s are classically filled with fluff to try to make the firm stand out from the rest of the field, folks will still look to find which firm would be the best comparison. 

Unfortunately for crypto, right now, Coinbase is going to be the answer. 

I say unfortunately because, as Empire co-host Jason Yanowitz pointed out on the podcast this morning, founders of custodians are concerned about an IPO because they don’t think the “bankers know how to value [them] ‘cause the sell side research is so crappy.”

Obviously, Coinbase’s business is huge and covers a lot of bases, but those bases aren’t its focus and shouldn’t be treated as such on a valuation basis when compared to — and this is just an example — something like BitGo. 

Kraken’s IPO, Yanowitz added, will probably not happen this year but perhaps 2026. 

For now, it looks like eToro’s prospectus filed earlier this week will be what other crypto-focused firms watch as they potentially look to debut this year.

Other firms that Yanowitz thinks are close to a decision on going public are Chainalysis and even potentially Gemini. 

Oh, and we’re still waiting on further word from Circle about its public debut. That one is going to be particularly interesting.

And now you know.

It’s a builders market. It will always be a builders market. 

Permissionless IV is for the ones deep in the code — building infra, launching new systems, and reshaping how this space runs.

🎤 Speaker apps are open — got something that matters? Say it on stage.

💻 Hackathon is live — $100K+ in bounties. Builders get in free.

June 22–26 | Brooklyn

Last week, I asked: Is the bullish momentum on the upswing?

We had a three-way tie!

Some of you think that DAS pushed us into bull mode, others aren’t so sure, and the third group is questioning why the rest of us haven’t been as bullish. 

This week, I’m wondering: