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Galois Capital, the crypto hedge fund that famously warned of the dangers around Terra's LUNA and UST ahead of their 2022 collapse, has been charged by the U.S. Securities and Exchange Commission for misleading investors and for not properly safeguarding customer funds.

The firm, which shut down in early 2023 after being impacted by the downfall of crypto exchange FTX, has settled the charges and will pay the regulator a civil penalty of $225,000, which will be distributed to users. Galois lost $40 million amid the shuttering of FTX, and in the announcement , the SEC specifically calls out the firm for using FTX to hold customer assets.

"According to the order, Galois Capital held certain crypto assets in online trading accounts on crypto asset trading platforms, including FTX Trading Ltd., that were not qualified custodians," the press release reads.

Galois appears to have landed in further hot water with the regulator for allegedly telling certain investors back in 2023 that their redemptions required a certain amount of advance notice, while allowing other investors to redeem funds with less notice.

The settlement marks something of a double whammy for the ill-fated hedge fund. Not only did Galois reportedly lose almost half of its assets due to FTX’s collapse; it has now paid up for violating American financial laws by even depositing its funds with Sam Bankman-Fried’s now-infamous exchange in the first place.

While the SEC’s order found that Galois violated the Investment Advisers Act, the fund did not admit or deny fault in settling with the agency, which is not atypical.

Prior to suffering a fatal blow in the fallout from FTX’s collapse, Galois was riding high on 2022’s crypto market turmoil. The fund made waves earlier that year for publicly warning about the stability of Terra and its algorithmic stablecoin, UST; it shorted Terra’s native token, LUNA, just before that coin and UST imploded in a stunning $60 billion collapse that kicked off an extended crypto bear market.

Galois was far from the only financial firm to lose customer funds in the wake of FTX’s demise. Numerous companies, like major crypto lenders Genesis and BlockFi , are still dealing with repaying funds lost in the collapse to former customers, years later.

Tuesday’s enforcement action potentially signals that these companies may be the target of additional legal action for depositing funds on FTX in the first place.

Editor's note: This story was updated after publication with additional details.