Mike Novogratz testifies in court about BitGo's collapsed $1.2B merger: Report
Mike Novogratz of Galaxy Digital testified in court that SEC regulatory challenges made completing the 2021 BitGo merger "very difficult."
On Tuesday, Mike Novogratz, the founder of Galaxy Digital, took the stand in court to confront BitGo's CEO Mike Belshe in an ongoing legal dispute centered on a proposed $1.2 billion merger that fell through in 2021.
At the time of its announcement, the proposed transaction represented the crypto industry's largest-ever merger, designed to establish an enormous conglomerate providing a comprehensive range of services during a period when cryptocurrency was attracting significant investor attention.
In August 2022, with the cryptocurrency market suffering from the aftermath of the Terra ecosystem's implosion, Galaxy terminated the agreement. BitGo is seeking a $100 million termination fee from Galaxy for abandoning the deal and alleges Galaxy concealed an ongoing investigation by US authorities, whereas Galaxy maintains that BitGo was late in delivering required financial documentation.
Bloomberg reports that during his Tuesday testimony at Delaware Chancery Court, Novogratz stated he was "pushing to get this deal done," but both Galaxy and BitGo came to understand that obtaining regulatory clearance for the merger was improbable due to the Securities and Exchange Commission, under Gary Gensler's leadership at the time, making the process "very difficult."
Novogratz further testified that the regulatory investigation was not targeting Galaxy and therefore would not have impacted the merger, while emphasizing that BitGo failed to deliver the required financial documentation by the deadline, thereby losing its entitlement to the $100 million termination fee.
While BitGo had negotiated for the termination fee provision, which included specific deadlines for submitting financial statements, complications arose from SEC accounting regulations mandating that companies record customer cryptocurrency holdings as liabilities on their books.
"This was incredibly damaging. Galaxy is telling the world we can't pass an audit."
Mike Belshe, BitGo CEO, testifying on Monday
During Monday's proceedings, Belshe took the stand and asserted that BitGo had furnished all of the required information.
The trial is expected to conclude this week, at which point a judge will render a decision on whether BitGo is entitled to receive the $100 million fee.