Mike Novogratz, founder of Galaxy Digital, appeared in Delaware Chancery Court to address a legal battle centered on a failed $1.2 billion merger with BitGo. The deal, announced in 2021, would have been the largest merger in the cryptocurrency sector, aiming to combine their services amid heightened investor interest. However, Galaxy Digital terminated the agreement in 2022 amid market turmoil following the collapse of the Terra ecosystem.
BitGo has demanded Galaxy pay a $100 million termination fee, alleging that Galaxy wrongfully pulled out and concealed a probe by U.S. regulators. Galaxy disputes this, arguing BitGo failed to submit required financial documents on time. Novogratz testified that he actively pushed to complete the merger but faced significant obstacles due to regulatory scrutiny from the Securities and Exchange Commission (SEC), which at the time was led by Gary Gensler. He emphasized that Galaxy was not under investigation and that any BitGo probe would not have hindered merger approval.
The contention over financial disclosures is a key issue in the case. BitGo sought to secure the termination fee through a contractual deadline to provide financial statements. However, accounting challenges arose when SEC rules mandated that customer cryptocurrency holdings be recorded as liabilities, complicating BitGo’s audit process. BitGo CEO Mike Belshe testified that the company supplied all necessary information, countering Galaxy’s claims that BitGo failed to pass an audit and accusing Galaxy of damaging their reputation by publicizing this.
The trial has drawn close attention as it may set precedents on handling mergers within the crypto industry under regulatory pressures. A judge is expected to issue a ruling on whether BitGo is entitled to the $100 million termination fee by the end of the week.