Galaxy was reportedly considering restructuring the merger through Canada after growing concerns about possible SEC opposition.
BitGo and Galaxy Digital continue to battle in court over the collapse of a $1.2 billion acquisition deal that was once expected to be the crypto industry’s biggest merger.
In a lawsuit filed this week in Delaware Chancery Court, BitGo alleges that Galaxy will withdraw from the deal in 2022 and is now seeking at least $100 million in damages, according to Bloomberg.
Bitter court battle
The crypto custodian alleges that Galaxy failed to make reasonable efforts to complete the merger and also withheld information about an investigation by U.S. authorities that may have affected its ability to obtain regulatory approval for the transaction. Galaxy founder and CEO Michael Novogratz challenged these claims in court. He maintained that the investigation did not involve Galaxy and had no impact on the merger’s approval process.
The acquisition was first announced in May 2021. Under the proposed agreement, BitGo co-founder and CEO Mike Belshe would join Galaxy as deputy CEO and sit on the company’s board. The combined company also planned to list its shares on the Nasdaq, which required approval from the US SEC.
However, the trade began to hit obstacles in 2022 as the crypto market slumped and regulators increased scrutiny of the sector.
According to court testimony, the companies eventually became concerned that the SEC, then chaired by Gary Gensler, would not approve the deal. Novogratz said Galaxy also considered restructuring the merger through Canada, where it was already listed, to avoid SEC-related hurdles and move the deal forward.
Missed the audit deadline
Galaxy closed the acquisition in August 2022. At the time, the company said BitGo had failed to submit its 2021 audited financial statements by the July 31 deadline set out in the merger agreement. The company said at the time that it did not have to pay the termination fee because the deadline had passed.
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BitGo, on the other hand, has repeatedly denied these claims and maintained that the necessary documentation has been submitted. In testimony earlier this week, Bershe said Galaxy’s public explanation of the termination was “incredibly damaging” by giving the impression that the company was unable to complete the audit.
