Galaxy Digital, BitGo Squabble as $1.2 Billion Crypto Deal Crumbles
Galaxy Digital closes $1.2 billion BitGo acquisition deal
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What was supposed to be a landmark deal for the crypto industry has fallen apart in acrimony as Galaxy Digital Holdings said it would abandon its $1.2 billion bid for BitGo, claiming the custodian failed to deliver financial statements that the target company insists it has accompanying.
Galaxy, an investment firm, is trying to walk away from a $100 million breach. The company announced Monday that it exercised “its contractual right to terminate” the cash and stock transaction.
It does not fit well with BitGo, which provides custody services for institutions. “BitGo has absolutely delivered on the audits that were necessary to get this deal done,” said Brian Timmons, a partner with the Quinn Emanuel law firm, which is representing the custodian. “Galaxy is the one with the problem, and it says: It’s not me, it’s you,” he adds.
When Forbes asked Galaxy spokesman Michael Wursthorn about BitGo’s claim, he said “I can’t speak to those statements.”
The acquisition was agreed in May 2021, with San-Francisco-based BitGo set to help Galaxy Digital expand its offerings for institutional investors. The transaction, the first $1 billion deal in the crypto industry, was expected to close in Q3 last year. After the acquisition was stalled for months as Galaxy Digital sought approval from the US Securities and Exchange Commission, which the company still does not have, BitGo refused to extend the deal without a termination fee.
“BitGo agreed to extend this deal back in March only because Galaxy agreed to a breakup fee,” Timmons said. “Without it, BitGo would never have agreed to the expansion. It had other interested suitors.”
The Galaxy’s Wursthorn insists his company was within its rights to terminate the deal and maintains that “we are not paying a termination fee.” When asked why the audited financial statements were a deal breaker for the acquisition, Wursthorn declined to answer.
Timmons says the fault lies with the Galaxy. “BitGo’s business remains as strong as ever. Galaxy is the one that has faced regulatory headwinds, he says. “The currency has fallen. It has been plagued by the Luna controversy. Anyone who reads the news knows that Galaxy is making excuses to walk away from this marriage and avoid paying the breakup fee.”
Galaxy Digital recently reported a loss of $554.7 million in the second quarter. But CEO Michael Novogratz said the company still had $1 billion in cash in the company’s Aug. 8 earnings call.
