Ontario judge finds ample evidence that Galaxy Digital misled investors about collapsed cryptocurrencies

An Ontario Superior Court judge has certified a class-action lawsuit against Galaxy Digital Inc. and its founder Mike Novogratz, concluding that substantial evidence supports claims of investor misconduct tied to the May 2022 collapse of Luna and TerraUSD. Justice Edward Morgan's August 27 ruling represents a critical procedural victory for plaintiffs, as certification requires clearing a higher evidentiary threshold than U.S. class-action standards—demonstrating a "reasonable possibility" that plaintiffs could prevail at trial rather than merely alleging plausible claims.

The Luna and TerraUSD collapse in May 2022 ranks among the most destructive cryptocurrency events on record, obliterating approximately US$40 billion in investor value within a single week. Galaxy Digital bore direct consequences: its Toronto-listed shares fell more than 40 percent during the same period, destroying roughly $2 billion in market capitalization. The lawsuit alleges that Galaxy and Novogratz aggressively encouraged investors to buy and hold both cryptocurrencies while systematically concealing material risks and a significant undisclosed conflict of interest—Galaxy was accumulating Luna at discounted prices and then rapidly liquidating its position as Luna's price surged, directly contradicting public promotion of the asset as a long-term holding.

Justice Morgan's characterization of Novogratz as "a rather boisterous" promoter carries legal weight in the ruling. The court emphasized that market perception conflated the individual founder with the company itself: "In the public's and the market's eyes, Novogratz was Galaxy and in 2021-2022 when the events at issue here transpired, Galaxy was Luna." This framing strengthens claims of personal liability for the founder alongside corporate liability. Novogratz's previous marketing of Galaxy as the "Goldman Sachs of crypto" now contextualizes the alleged misleading conduct as originating from a figure positioned as a credible institutional player with fiduciary-grade prudence.

With the certification hurdle cleared, Galaxy Digital has three paths forward: appeal the certification ruling to a higher court, enter settlement negotiations with the plaintiff class, or proceed to trial defense. The certification decision represents a substantial shift in litigation risk for the company, as it validates the core allegations of intentional or reckless investor deception and unlocks potential exposure to class-wide damages. The case was initially filed in late 2022, and the August 2026 certification ruling indicates a multi-year litigation trajectory typical of complex securities class actions involving cryptocurrency assets.