Novogratz Testifies in $1.2B Galaxy-BitGo Dispute

Galaxy Digital founder Mike Novogratz appeared in Delaware Chancery Court earlier this week to testify in a legal battle with BitGo over their failed $1.2 billion merger. The case revolves around whether BitGo is entitled to a $100 million termination fee after the deal fell apart in August 2022.

The proposed merger, announced in May 2021, was set to be the largest in crypto history at the time. Galaxy planned to acquire BitGo, a leading crypto custody platform, combining its capabilities with Galaxy’s trading and asset management businesses. The deal was expected to close by the end of 2021 but unraveled as regulatory hurdles and market turmoil took hold. By the time Galaxy pulled the plug, the crypto market was reeling from the collapse of Terra’s ecosystem and broader declines in asset prices.

Novogratz testified that Galaxy was committed to completing the merger but faced mounting regulatory uncertainty under the SEC’s leadership at the time. He also argued that BitGo failed to deliver audited financial statements as required by the agreement, voiding its claim to the termination fee. BitGo countered, alleging Galaxy used the missed deadline as a pretext to back out of the deal while hiding its own regulatory challenges.

“This was incredibly damaging,” BitGo CEO Mike Belshe said during his testimony, accusing Galaxy of undermining the custodian’s reputation by suggesting it couldn’t pass an audit. Belshe maintains that all necessary financial information was provided on time and that Galaxy, not BitGo, is at fault for the merger’s collapse. The court will decide this week whether BitGo is entitled to the $100 million fee.

At the heart of the dispute is the SEC’s 2021 guidance requiring companies to account for customer crypto holdings as liabilities, which complicated financial reporting for BitGo and delayed its audits. This regulatory shift highlights the broader challenges faced by crypto firms navigating compliance in an evolving legal environment.

The case also underscores how market conditions can derail even the most ambitious deals. When the merger was first announced, investor interest in crypto was surging, with Bitcoin trading near $60,000. By the time the deal was abandoned, the market had entered a deep downturn, with Bitcoin’s price halving and sentiment souring.

While Galaxy has previously scored a legal win in this matter—avoiding damages in a related 2023 claim—this ongoing trial could still result in a costly payout. A verdict is expected soon, potentially setting a precedent for how crypto mergers and terminations are handled in the future.

As of today, Galaxy Digital’s stock is trading at $29.57, up slightly by 0.06%. The outcome of this case is unlikely to have an immediate impact on trading, but it could influence long-term confidence in Galaxy’s deal-making and strategy.

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