BitGo and Galaxy Digital are continuing their courtroom battle over the collapse of a $1.2 billion acquisition agreement that was once expected to become the largest merger in the crypto industry.
During proceedings this week in Delaware Chancery Court, BitGo argued that Galaxy backed out of the transaction in 2022 and is now seeking at least $100 million in damages, according to Bloomberg.
Bitter Legal Showdown
The crypto custody firm claims Galaxy failed to make reasonable efforts to complete the merger and also hid information about investigations by US authorities that may have affected their ability to obtain regulatory approval for the deal. Galaxy founder and CEO Michael Novogratz disputed those allegations in court. He argued that the probes did not involve Galaxy and had no effect on the approval process tied to the merger.
The acquisition was first announced in May 2021. Under the proposed agreement, BitGo co-founder and CEO Mike Belshe was expected to join Galaxy as deputy CEO and take a seat on the company’s board. The combined entity also planned to list shares on the Nasdaq, which required approval from the US SEC.
However, the deal began facing obstacles as crypto markets weakened in 2022 and regulators increased scrutiny on the sector.
As per the testimony in court, both companies eventually became concerned that the SEC, which was then chaired by Gary Gensler, would not approve the transaction. In an attempt to avoid SEC-related hurdles and move the deal forward, Novogratz said Galaxy even explored restructuring the merger through Canada, where the company was already publicly listed.
Missed Audit Deadline
Galaxy terminated the acquisition in August 2022. At that time, it stated that BitGo had failed to provide audited financial statements for 2021 by a July 31 deadline outlined in the merger agreement. The company said at the time that the missed deadline meant it was not required to pay a termination fee.
BitGo, on the other hand, has repeatedly denied those claims and maintained that the necessary documents had been delivered. During testimony earlier this week, Belshe said Galaxy’s public explanation for ending the deal was “incredibly damaging” as it created an impression that the company was unable to complete an audit.
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