BitGo seeks $100M in damages from Galaxy Digital for calling off a $1.2B acquisition
- ByStartupStory | August 16, 2022
The crypto sector’s first $1 billion transaction, announced at the height of last year’s record increase in token values, is disbanding as the market reverses most of the gains – and not everyone is happy about it.
Galaxy Digital reported Monday that it has canceled its $1.2 billion proposed acquisition of cryptocurrency custodian BitGo, which was disclosed in May of last year after the San Francisco-based business failed to deliver audited financial statements for the fiscal year 2021. BitGo’s response: Galaxy Digital’s actions are “improper,” and the company intends to hold the company “legally accountable” and seek more than $100 million in damages.
BitGo’s claimed inability to produce financial documents by July 31 violates the agreements agreed upon by the two companies last year, Galaxy Digital stated in a public statement, adding that the transaction will be terminated without penalty. Galaxy Digital stock, which is traded in Toronto, soared on the news.
BitGo has contested Galaxy Digital’s assertion, claiming that the arrangement was not set to expire until December 31 “at the earliest” and also that Galaxy Digital has failed to pay the $100 million reverse break fee it “promised back in March 2022 to convince BitGo to prolong the merger agreement.”
The planned transaction, which included Galaxy Digital issuing 33.8 million additional shares and a $265 million cash component, was expected to be the first $1 billion deal in the crypto sector. The BitGo acquisition was intended to assist Galaxy Digital in expanding its offers to institutional investors by adding services also including investment banking, prime lending, and tax services. BitGo, which is backed by Galaxy Digital, Goldman Sachs, Valor Equity Partners, Craft Ventures, DRW, and Redpoint Ventures, reported having over $64 billion in assets in custody at the end of last year.
“The combined strength of our technology, solutions, and people will unleash unique value for our clients and create long-term development for our combined organization. We are delighted to welcome Mike Belshe and the amazing BitGo team to Galaxy Digital,” stated Mike Novogratz, CEO, and creator of Galaxy Digital, at the time.
“Galaxy stands positioned for success as well as to take advantage of the strategic possibilities to develop sustainably,” Novogratz (shown above) said on Monday. We are dedicated to continuing our process of listing in the United States and offering our clients a premier product that genuinely makes Galaxy a one-stop shop for institutions.”
Galaxy Digital earlier this month reported a second-quarter loss of $554.7 million, up from a loss of $183 million a year ago. During the results call, Novogratz stated that Galaxy Digital has around $1 billion in cash on hand. Galaxy Digital said today that it is awaiting SEC approval and stock exchange permission for a Nasdaq listing. According to BitGo, it has retained the California-based law firm, Quinn Emanuel, to pursue proper legal action.
“The attempt by Mike Novogratz & Galaxy Digital to blame the termination on BitGo is ludicrous,” Quinn Emanuel partner R. Brian Timmons stated in a statement. “So far, BitGo has fulfilled its promises, including the transmission of audited financials. It is widely known that Galaxy posted a $550 million loss in the most recent quarter, that its stock is underperforming, and both Galaxy and Mr. Novogratz have been sidetracked by the Luna debacle. Either Galaxy pays BitGo the promised $100 million termination fee, or it has acted in bad faith and faces damages of that amount or more.”
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