Key takeaways
- Bitgo is seeking at least $100 million from Galaxy Digital over a failed 2021 merger worth $1.2 billion.
- Galaxy’s Mike Novogratz said this week that U.S. regulatory investigations had not affected the merger approval process.
- Chancellor Kathaleen McCormick will decide the case after the Delaware Supreme Court revives it in May 2024.
Bitgo CEO Mike Belshe Challenges Termination of Galaxy Digital Merger in 2022 in Court
The case dates back to May 2021, when Galaxy Digital Holdings agreed to acquire Bitgo Holdings, a crypto guard and security company. At the time, it was the largest deal in the history of the crypto industry.
Galaxy terminated the agreement in August 2022. The company cited Bitgo’s failure to provide audited financial statements for fiscal year 2021 in a form consistent with contractual standards. New accounting guidance from the U.S. Securities and Exchange Commission (SEC) staff complicated crypto-related filings, and Galaxy argued it had a net termination right with no fees owed.
Bitgo disputed this position. According to Bloomberg, CEO Mike Belshe said Bitgo provided the required documentation and that Galaxy’s layoff demands caused direct harm to the company. Bitgo is seeking at least the $100 million reverse breakup fee written into the merger agreement, and says actual damages could exceed that figure.
“This has been incredibly damaging,” Belshe reportedly said in court, according to Sabrina Willmer of Bloomberg.
Novogratz addressed several issues during his testimony. He said the U.S. regulatory investigations were not directly aimed at Galaxy and had no bearing on the merger’s regulatory approval process. He also discussed Galaxy’s trading profits from Luna, which amount to nearly $400 million, saying these sales were made to reduce risks.
Bitgo alleges that Galaxy failed to make reasonable efforts to complete the agreement. The company also claims that Galaxy hid details of government investigations that could have affected regulatory approvals, including potential SEC concerns related to Galaxy’s activities. Bitgo claims Galaxy walked away after the deal became financially unattractive due to declining crypto markets.
The legal route was anything but direct. Bitgo filed suit in Delaware Chancery Court in 2022. Vice Chancellor J. Travis Laster dismissed the case in June 2023, ruling that Galaxy had a valid termination right because Bitgo’s financial statements did not comply with the terms of the agreement.
The Delaware Supreme Court overturned that decision in May 2024. The justices found that the definition of “financial statements” in the merger agreement was ambiguous and that both sides offered reasonable interpretations. The case was sent back to the lower court.
Proceedings have continued since, including discovery litigation. The trial before Chancellor Kathaleen St. Jude McCormick is ongoing. No final decision has been made as of May 23, 2026.
The outcome hinges on several questions: whether Galaxy met its contractual obligation to pursue the deal in good faith, whether Bitgo’s financial statements satisfied the terms of the deal, and whether Galaxy had a disclosure obligation related to regulatory investigations.
Possible outcomes include Galaxy paying the $100 million termination fee, larger damages, a settlement between the parties, or a decision in Galaxy’s favor. The court, not a jury, will decide.
Despite the litigation, the two companies have collaborated on other initiatives, including staking. This detail did little to resolve the main dispute over what happened to one of the biggest deals offered in crypto.
The case is filed under CA 2022-0808 in the Delaware Chancery Court.
