In a recent development, Galaxy Digital, the prominent crypto merchant bank led by Mike Novogratz, has received favorable judgment from a federal judge regarding its decision to cancel the planned acquisition of BitGo, a leading crypto custodian. The judge ruled that Galaxy had valid grounds for terminating the deal due to BitGo’s provision of non-compliant financial documents. Let’s delve into the details.
Back in May 2021, Galaxy Digital and BitGo reached an agreement to merge, with Galaxy aiming to establish itself as a comprehensive solution provider for prime brokerage services catering to institutional investors. However, amidst a bearish crypto market, Galaxy eventually called off the acquisition in August 2022, citing BitGo’s failure to provide audited financial statements.
Delaware Chancery Court Vice Chancellor James Laster recently issued a ruling in favor of Galaxy Digital. According to the judge, Galaxy had a “valid basis” to terminate the deal, as BitGo had provided them with financial documents that did not meet the required compliance standards. Judge Laster stated that there were no allegations suggesting that Galaxy’s decision to exercise its termination right was inconsistent with the implied covenant of good faith and fair dealing.
In response to Galaxy’s termination of the deal, BitGo filed a lawsuit seeking $100 million in damages. They criticized Galaxy’s reasoning, deeming it “absurd” and suggesting that Galaxy withdrew from the acquisition due to its inability to afford the purchase after incurring substantial losses during the crypto market downturn.
The recent ruling by the federal judge in favor of Galaxy Digital marks a significant milestone in the ongoing dispute over the terminated acquisition of BitGo. The judge’s decision reinforces Galaxy’s claim that they had legitimate reasons to cancel the deal due to BitGo’s non-compliant financial documents. The outcome of this case will likely have implications for the future of crypto mergers and acquisitions, emphasizing the importance of compliance and transparency in the industry.
