Galaxy Digital sued for $100 million for ditching landmark Bitgo deal

By Tom Hals

WILMINGTON, Del (Reuters) – Galaxy Digital Holdings Ltd, a crypto financial services firm, should pay at least $100 million in damages for walking away from its $1.2 billion takeover deal for BitGo Inc, the digital asset custodian said in a court filing made public on Thursday.

Galaxy ended the takeover, the first billion-dollar crypto deal, because it was reeling from the collapse of digital currencies but falsely blamed BitGo’s accounting, according to the lawsuit by BitGo that was filed on Tuesday under seal.

“Galaxy’s decision to abandon the merger with BitGo prematurely had nothing to do with BitGo’s financial statements and everything to do with Galaxy’s massive losses,” said Bitgo’s complaint, which was filed in Delaware’s Court of Chancery.

The lawsuit seeks at least $100 million in damages for Galaxy’s alleged breach of the takeover deal.

Galaxy said it would seek to have the lawsuit dismissed.

“We completely disagree with the allegations in the complaint,” said a statement from Galaxy.

Galaxy said in August it was terminating the takeover because BitGo failed to deliver audited 2021 financial statements by a July 31 deadline.

Galaxy announced the deal in May 2021, when a frenzy for digital assets sent bitcoin to more than $55,000.

The cash and stock acquisition was the biggest crypto deal at the time and expanded Galaxy into digital custodian services as it was preparing to list its stock on Nasdaq.

However, since late 2021, investors have soured on digital assets and on Thursday bitcoin was trading at just under $20,000. Galaxy reported a loss of $554 million for its second quarter of this year, but emphasized it maintained more than $1 billion in cash and still intends to list on Nasdaq.

Galaxy was founded by former hedge fund manager turned cryptocurrency pioneer Michael Novogratz in 2018 as an investment management firm which then expanded into investment banking and trading.

(Reporting by Tom Hals in Wilmington, Delaware; Editing by David Gregorio)