Galaxy Digital Closes $44 Million Purchase of Self-Custody Platform GK8

Mike Novogratz’s crypto-focused financial services firm Galaxy Digital has closed the purchase of institutional self-custody platform GK8 more than two months after winning an auction to buy the company from bankrupt crypto lender Celsius.

GK8 solutions will continue to be available to the market, but Galaxy will also integrate the technology into its upcoming prime brokerage platform, GalaxyOne.

Celsius filed for bankruptcy protection last July after the crypto winter set in and put several assets up for sale – including GK8, which the lender had bought for $115 million in November 2021.

The bankruptcy and continued bear market pressure on valuations allowed Galaxy to pick up GK8 for roughly $44 million, a more than 60% discount. Galaxy had previously pulled out of a $1.2 billion deal with crypto watchdog BitGo, prompting a lawsuit.

The acquisition will help build on GalaxyOne, the previously launched platform that will offer a wide range of financial services for institutions, including trading, lending, derivatives, cross-portfolio margining and a range of custody options, including GK8. Galaxy will also gain an office in Tel Aviv and a team of nearly 40 people, including the founders, who have joined Galaxy to lead its custody technology offering.

“Investor demand for innovative and secure custody services continues to grow, and the acquisition of GK8 reinforces our efforts to offer customers best-in-class cold storage solutions along with cutting-edge wallet technology,” Galaxy Digital founder and CEO Novogratz said in a press release provided to CoinDesk. “In addition to continuing to provide highly valuable custody technology to clients, the GK8 team will play a central role in our evolution to provide a full-service financial platform for digital assets.”

Founded in 2018, GK8 solutions are tailored for traditional financial and crypto-native institutions such as banks, hedge funds and brokerage client eToro. The infrastructure allows clients to enable staking, decentralized finance (DeFi) networks, non-fungible token (NFT) support, trading services and more.

GK8 offers its services through a multi-party computation (MPC) vault, an automated digital asset storage method that shares the private key needed to access the assets among an unlimited number of co-signers, and a cold vault, a slower but more secure method where transactions processed manually.

While cold wallets keep assets safe by not connecting to the internet where private keys are vulnerable to hackers, most products on the market need to go online at some point to get blockchain-validated data to confirm the transaction. GK8 has developed patented cryptographic techniques that allow the cold vault to create, sign and send transactions to the blockchain without an internet connection, CEO Lior Lamesh explained to CoinDesk in an interview.

“Since we never receive input, that means we’re not exposed to any cybersecurity attack vector. It’s not that we’re reducing the risk here—we’re removing it,” Lamesh said.

Lamesh and GK8 co-founder and CTO Shahar Shamai previously worked together in the office of Israel’s prime minister to protect the country’s strategic assets from cyber attacks. GK8 was launched in 2018, and the company was acquired by Celsius three years later. GK8 was able to remain relatively unscathed during the bankruptcy because it operated as an independent company, Lamesh said.