Delaware Supreme Court Reinstates BitGo’s $100 Million Lawsuit Against Galaxy Digital

The Delaware Supreme Court recently ruled in favor of BitGo, overturning a lower court’s decision that had previously dismissed the company’s $100 million lawsuit against Galaxy Digital.

This decision stemmed from a failed $1.2 billion merger agreement between the two firms, which the court found to contain “ambiguous” language. This ambiguity prompted the reversal of the Delaware Chancery Court’s earlier ruling, thus allowing for the introduction of additional evidence to clarify the confusion surrounding the terms of the agreement.

Initial Lawsuit and Allegations

BitGo, which initially filed the lawsuit in August 2022, alleged that Galaxy Digital had intentionally breached their acquisition agreement. The contention arose after Galaxy terminated the deal, citing BitGo’s failure to provide audited financial statements for the year 2021 as a justifiable reason for the termination.

Despite this setback, the Delaware Supreme Court’s decision has now reopened the door for BitGo to pursue further legal action, much to the satisfaction of BitGo’s legal representation, R. Brian Timmons from the law firm Quinn Emanuel. Timmons expressed contentment with the appeal’s outcome and looked forward to continuing the legal battle in the Chancery Court.

Previously, in June 2023, the Delaware Court of Chancery had dismissed BitGo’s case with prejudice. Vice Chancellor J. Travis Laster had ruled that Galaxy had a clean termination right concerning the BitGo acquisition at that time.In response to the Supreme Court’s recent decision, a Galaxy spokesperson indicated that the company would continue to defend itself vigorously, expressing confidence in the merits of their case.

Galaxy Digital, led by Mike Novogratz, had announced its intention to acquire BitGo in May 2021 as part of its public offering in the United States. However, in November 2022, as the cryptocurrency exchange FTX faced collapse, Galaxy disclosed approximately $77 million in exposure to FTX shortly before the exchange filed for bankruptcy.

Galaxy Digital’s Subsidiary Involvement

Despite these challenges, Galaxy Digital’s subsidiary, Galaxy Asset Management, was appointed by the FTX estate in 2023 to assist with the management of the bankrupt exchange’s crypto holdings. This includes responsibilities such as selling, staking, and hedging these assets. Steve Kurz, the Global Head of Galaxy Asset Management, leads this division which was established in 2018 and encompasses roles in Global Markets and Digital Infrastructure Solutions.

Despite a 4% decline in Galaxy Digital’s stock (GLXY) to $12.80 in after-hours trading, the shares have gained 23.5% since the beginning of the year. These gains have largely followed the approval of spot Bitcoin ETFs in mid-January. Nevertheless, the stock remains nearly 70% lower than its all-time high of $40, recorded during the previous crypto market peak in November 2021. 

Future of Spot Bitcoin ETFs

Steve Kurz recently predicted that top wirehouses would increase their involvement in spot Bitcoin ETFs within the next year, indicating that institutional fear of missing out (FOMO) could drive this trend. Kurz’s statement came during the Exchange ETF Conference in Miami Beach, Florida, on February 19, where he noted that companies offering spot Bitcoin ETFs had been inundated with queries from financial advisers.

The Delaware Supreme Court’s ruling marks a significant development in the ongoing legal battle between BitGo and Galaxy Digital, providing BitGo with a renewed opportunity to seek justice and potentially reshape the future of their contested acquisition agreement.