Handshake with red X mark

Galaxy Digital BitGo deal falls through

Galaxy Digital, the digital asset-focused financial services and asset management company, has terminated its $1.2 billion deal to acquire the digital asset custodian BitGo. According to Galaxy Digital, the deal was broken off because BitGo failed to deliver an audited financial statement for the 2021 business year by the required date, July 31, 2022, in the agreement between the companies.

However, the BitGo team believes that Galaxy Digital broke their contract and intends to hold Galaxy Digital legally responsible for backing out of the deal.

“The attempt by Mike Novogratz and Galaxy Digital to blame the termination on BitGo is absurd,” said R. Brian Timmons, a partner with Quinn Emanuel, the law firm BitGo has hired to handle this matter.

“BitGo has honored its obligations thus far, including the delivery of its audited financials. It is public knowledge that Galaxy reported a $550 million loss this past quarter, that its stock is performing poorly, and that both Galaxy and Mr. Novogratz have been distracted by the Luna fiasco. Either Galaxy owes BitGo a $100 million termination fee as promised or it has been acting in bad faith and faces damages of that much or more,” he added.

In BitGo’s official response statement, it says that it fulfilled its end of the deal and that the terms of the agreement were not set to expire until December 31, 2022, with a $100 million reverse break fee if Galaxy Digital backed out of the contract.

Galaxy has responded to BitGo’s official announcement by saying:

“We believe BitGo’s claims are without merit and we will defend ourselves vigorously. As previously stated, BitGo did not provide certain BitGo financial statements needed by Galaxy for its SEC filing. Galaxy’s Board of Directors then made the decision to exercise its contractual right to terminate.”

Asset custodians

Galaxy Digital was looking to expand by way of a digital asset custodian because it would help it accomplish its goal of becoming a full-service platform for institutions looking to allocate money to digital assets. Custodians are an essential part of the banking system. They are responsible for safekeeping a significant portion of the assets owned by financial institutions. But when it comes to digital assets, traditional custodians typically don’t have the infrastructure they need to securely hold digital assets, which is why many institutions are forced to turn to digital asset-specific custodians like BitGo.

When I asked Galaxy Digital if they had plans to acquire another custodian or build their own from scratch, they were reluctant to give me answers and instead pointed me to a number of their resources that have already been published, such as previous earnings reports and press releases.

However, Galaxy’s communications team did tell me to keep an eye on Galaxy One Prime, its new product offering for institutional investors that will integrate trading, lending, derivatives, and a digital asset custody component.

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