Key Takeaways
- • Galaxy Digital founder Mike Novogratz testified in Delaware Chancery Court on Tuesday that regulatory obstacles from the SEC under then-Chair Gary Gensler made completion of the $1.2 billion BitGo merger "very difficult," positioning regulatory burden as the primary reason for deal failure.
- • The core dispute centers on a $100 million termination fee: Galaxy claims BitGo failed to deliver audited financial statements by the contractual deadline, thereby forfeiting the fee; BitGo contends it provided all required information and that Galaxy manufactured a pretext to exit.
- • SEC accounting rules requiring companies to record customer crypto holdings as liabilities created a material obstacle to BitGo's audit compliance, according to Novogratz testimony, complicating BitGo's ability to meet financial statement deadlines.
- • BitGo CEO Mike Belshe testified Monday that Galaxy's termination claims are false and that the company's public statements about BitGo's audit failures are damaging to BitGo's reputation and business credibility.
- • Trial conclusion is expected this week, with the Delaware Chancery Court judge to rule on whether BitGo is entitled to the $100 million breakup fee—a decision that will establish liability for deal termination.
Summary
Galaxy Digital and BitGo remain locked in litigation over the 2021 collapse of what was then the largest proposed crypto merger on record. The $1.2 billion acquisition, designed to create a comprehensive crypto services platform, never closed, and the two parties are now battling in Delaware Chancery Court over whether BitGo is entitled to a $100 million termination fee.
Novogratz testified Tuesday that Galaxy made genuine efforts to complete the transaction but encountered insurmountable regulatory headwinds. He stated that the SEC, under Gary Gensler's leadership, made approval "very difficult" and that Galaxy itself was not under regulatory scrutiny. Novogratz's core argument centers on BitGo's alleged failure to deliver audited financial statements within the contractual deadline, which he contends eliminated the company's claim to the termination fee. He further asserted that BitGo did not provide the needed financial information in time, thereby voiding the breakup provision.
The underlying technical issue complicating BitGo's compliance involves SEC accounting guidance requiring companies to record customer crypto holdings as liabilities—a rule that created substantial audit complications for the crypto custody provider. According to Novogratz, this regulatory constraint made it nearly impossible for BitGo to meet the agreed-upon financial disclosure timeline.
BitGo CEO Mike Belshe presented a sharply different narrative on Monday, testifying that the company furnished all required information and that Galaxy deliberately manufactured audit failures as a pretext for exiting a deal that had become less attractive as crypto markets declined. Belshe stated that Galaxy's public statements alleging BitGo's audit deficiencies are "incredibly damaging" to BitGo's standing, effectively telling the market that the company cannot pass an audit.
The judge is expected to issue a ruling this week, determining whether the evidence supports Galaxy's position that BitGo forfeited its termination fee through non-compliance, or whether BitGo's assertion that it met all obligations will result in a $100 million award to the custody firm.
Novogratz testified Tuesday that Galaxy made genuine efforts to complete the transaction but encountered insurmountable regulatory headwinds. He stated that the SEC, under Gary Gensler's leadership, made approval "very difficult" and that Galaxy itself was not under regulatory scrutiny. Novogratz's core argument centers on BitGo's alleged failure to deliver audited financial statements within the contractual deadline, which he contends eliminated the company's claim to the termination fee. He further asserted that BitGo did not provide the needed financial information in time, thereby voiding the breakup provision.
The underlying technical issue complicating BitGo's compliance involves SEC accounting guidance requiring companies to record customer crypto holdings as liabilities—a rule that created substantial audit complications for the crypto custody provider. According to Novogratz, this regulatory constraint made it nearly impossible for BitGo to meet the agreed-upon financial disclosure timeline.
BitGo CEO Mike Belshe presented a sharply different narrative on Monday, testifying that the company furnished all required information and that Galaxy deliberately manufactured audit failures as a pretext for exiting a deal that had become less attractive as crypto markets declined. Belshe stated that Galaxy's public statements alleging BitGo's audit deficiencies are "incredibly damaging" to BitGo's standing, effectively telling the market that the company cannot pass an audit.
The judge is expected to issue a ruling this week, determining whether the evidence supports Galaxy's position that BitGo forfeited its termination fee through non-compliance, or whether BitGo's assertion that it met all obligations will result in a $100 million award to the custody firm.
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