Galaxy reportedly considered restructuring the merger across Canada after concerns grew about possible opposition from the SEC.
BitGo and Galaxy Digital continue their legal battle over the collapse of a $1.2 billion acquisition deal that was once expected to become the crypto industry’s largest merger.
During proceedings this week in Delaware Chancery Court, BitGo argued that Galaxy withdrew from the transaction in 2022 and is now seeking at least $100 million in damages, according to Bloomberg.
Bitter legal confrontation
The cryptocurrency custody firm claims that Galaxy failed to make reasonable efforts to complete the merger and also withheld information about investigations by U.S. authorities that could have affected their ability to obtain regulatory approval for the deal. Galaxy founder and CEO Michael Novogratz disputed the allegations in court. He argued that the investigations did not involve Galaxy and had no effect on the approval process related to the merger.
The acquisition was first announced in May 2021. Under the proposed deal, BitGo co-founder and CEO Mike Belshe was to join Galaxy as deputy CEO and serve on the company’s board of directors. The combined entity also planned to list its shares on Nasdaq, which required approval from the US SEC.
However, the deal began to face roadblocks as crypto markets weakened in 2022 and regulators increased scrutiny of the sector.
According to testimony heard in court, both companies eventually feared that the SEC, then chaired by Gary Gensler, would not approve the transaction. To try to avoid SEC hurdles and move the deal forward, Novogratz said Galaxy even considered restructuring the merger across Canada, where the company was already publicly traded.
Audit deadline missed
Galaxy terminated the acquisition in August 2022. At that time, it said BitGo failed to provide audited financial statements for 2021 by the July 31 deadline set in the merger agreement. The company said at the time that missing the deadline meant it was not required to pay a termination fee.
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BitGo, on the other hand, has repeatedly denied these claims and maintained that the necessary documents had been provided. During his testimony earlier this week, Belshe said Galaxy’s public explanation for ending the deal was “incredibly damaging” because it made it appear the company was incapable of performing an audit.
