Galaxy has reportedly explored restructuring the merger through Canada after growing concerns about potential SEC opposition.
BitGo and Galaxy Digital continue their courtroom battle over the collapse of a $1.2 billion acquisition agreement that was once expected to become the largest merger in the cryptocurrency industry.
During proceedings this week in Delaware Chancery Court, BitGo argued that Galaxy backed out of the deal in 2022 and is now seeking at least $100 million in damages, according to Bloomberg.
Bitter legal confrontation
Cryptocurrency company Claims Galaxy failed to make reasonable efforts to complete the merger, and also concealed information about investigations conducted by US authorities that may have affected its ability to obtain regulatory approval for the transaction. Galaxy founder and CEO Michael Novogratz disputed the claims in court. He said the investigations did not include Galaxy and had no impact on the approval process associated with the merger.
The acquisition was first Announce in May 2021. Under the proposed agreement, Mike Belschi, co-founder and CEO of BitGo, was expected to join Galaxy as executive vice president and take a seat on the company’s board of directors. The combined entity also planned to list its shares on the Nasdaq, which would require approval from the U.S. Securities and Exchange Commission.
However, the deal began to face hurdles as cryptocurrency markets weakened in 2022 and regulators increased scrutiny of the sector.
According to testimony filed in court, the two companies eventually became concerned that the Securities and Exchange Commission, then headed by Gary Gensler, would not approve the deal. In an effort to avoid SEC-related hurdles and move the deal forward, Novogratz said Galaxy explored restructuring the merger through Canada, where the company was already publicly listed.
Missing audit deadline
Galaxy It has been terminated acquisition in August 2022. At the time, it reported that BitGo had failed to file audited financial statements for 2021 by the July 31 deadline stipulated in the merger agreement. The company said at the time that the missed deadline meant it was not required to pay the termination fee.
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On the other hand, BitGo has repeatedly denied these allegations and confirmed that the necessary documents have been handed over. During his testimony earlier this week, Belsci said Galaxy’s public explanation for terminating the deal was “incredibly damaging” because it created the impression that the company was unable to complete the audit process.
