- The case underscores how legal uncertainty and compliance hurdles continue to challenge large-scale crypto partnerships.
- BitGo contends that Galaxy improperly terminated the agreement, and Galaxy is facing a $100 million termination fee dispute.
- Mike Novogratz claims that tighter SEC rules under Gary Gensler made merger approval challenging and raised concerns about regulatory pressure on crypto mergers and acquisitions.
Could Regulatory Pressure Have Stopped Crypto’s Biggest Merger? Galaxy Digital is a financial services and investment firm that specializes in cryptocurrencies and blockchain technology.
It assists organizations and companies in investing in and utilizing digital assets. Due to the failure of their proposed $1.2 billion acquisition, BitGo CEO Mike Belshe and Galaxy Founder Michael Novogratz appeared in Delaware court this week, escalating a legal conflict between the two companies.
Galaxy’s decision to back out of its 2022 BitGo acquisition is the subject of the legal dispute. The agreement was regarded as one of the largest mergers in the cryptocurrency sector when it was revealed during the 2021 crypto boom.
BitGo is now requesting at least $100 million in damages, claiming Galaxy failed to make a reasonable attempt to close the acquisition and concealed crucial information regarding regulatory investigations.
Did Tougher SEC Rules Derail Galaxy’s $1.2B BitGo Deal?
In his testimony, Novogratz claimed that while Galaxy was still dedicated to finishing the transaction, the US regulatory environment had grown more challenging as the cryptocurrency market declined in 2022.
In testimony on Tuesday in Delaware Chancery Court, Novogratz stated, “I was pushing to get this deal done the entire time.” He claimed that under the direction of previous SEC Chair Gary Gensler, both businesses soon realized that getting approval from the U.S. Securities and Exchange Commission (SEC) had grown more difficult.
Novogratz claims that Galaxy even looked into arranging the acquisition through Canada while they awaited improvements in US regulations.
Because the combined business intended to list publicly on Nasdaq, the purchase required SEC approval. This added attention at a time when regulators were tightening regulations throughout the digital asset sector.
Did Galaxy Hide Its Links To The Luna Collapse From BitGo?
BitGo claimed that Galaxy had withheld information related to inquiries into its connection to the Luna token ecosystem of Terraform Labs.
Belshe asserted that the merger approval procedure might have been significantly impacted by the concealed regulatory monitoring. Belshe told the court, “It was pretty insulting.” “They kept it a secret from us.”
The disagreement also brings up Galaxy’s participation in Luna trading before the ecosystem’s collapse, which led to one of the biggest market crashes in cryptocurrency history in 2022.
In defense of Galaxy’s conduct, Novogratz denied that Galaxy was responsible for the speculative frenzy surrounding the project and stated that the company reduced exposure as prices climbed.
He stated in his testimony, “The idea that I single-handedly created this lunacy is just not correct.”
Why Delaware’s Supreme Court Reopened The Galaxy-BitGo Case?
According to the report, Galaxy asserted that BitGo lost its right to the termination fee since it did not submit audited financial statements by the deadline specified in the merger agreement.
BitGo refuted the allegations, claiming that the required paperwork was properly submitted and accusing Galaxy of using the problem as an excuse to back out of the deal when the market deteriorated.
Belshe stated, “This was incredibly damaging,” alluding to Galaxy’s disclosure in public that the arrangement was being terminated. “The world is being informed by Galaxy that we are unable to pass an audit.”
After Delaware’s Supreme Court reopened the issue in 2024 after finding that parts of the merger agreement contained unclear wording involving financial statement compliance obligations, the legal dispute persisted for a number of years.
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