In a significant legal victory, Galaxy Digital, a leading US cryptocurrency investment and asset management firm, emerged unscathed from its lawsuit with BitGo, a digital asset custodial service provider. Reports say the case was dismissed, giving Galaxy Digital a crucial reprieve in this legal dispute.
Court upholds Galaxy’s ‘clean termination’ of BitGo deal
The U.S.-based Delaware Court of Chancery has largely dismissed the case brought by digital asset custodian BitGo against crypto investment firm Galaxy Digital, following Galaxy’s decision to drop its proposed acquisition of BitGo in 2022.
Court records dated June 9 reveal that Vice Chancellor J. Travis Laster dismissed BitGo’s lawsuit against Galaxy Digital with prejudice. The move follows Galaxy’s decision to abandon its plan to acquire BitGo for $1.2 billion in August 2022, despite considerable effort, due to a breach of contract. In response, BitGo filed a lawsuit against Galaxy, demanding $100 million in compensation.
The move comes two years after Galaxy initially announced in May 2021 that it intended to buy BitGo in a cash-and-stock deal believed to be worth around $1.2 billion.
Galaxy revealed last August that it was terminating its agreement to acquire BitGo, citing that the latter had failed to provide audited financial statements for 2021 by the stipulated July 31 deadline.
In response, BitGo retained the services of the law firm Quinn Emanuel. The firm claimed that BitGo did submit the required documents. R. Brian Timmons, partner at Quinn Emanuel, previously said that BitGo was entitled to a termination fee of $100 million or damages in excess of that amount.
BitGo will challenge the court ruling
Judge J. Travis Laster approved Galaxy Digital’s request for dismissal because legal documents say BitGo failed to provide “audited 2021 company financial statements in accordance with the contract” within the agreed time frame.
The documents were found to be non-compliant due to a use restriction that would prevent their inclusion in an S-1 form prepared in accordance with Regulation SX, pursuant to the court document.
A BitGo spokesperson said the company intends to appeal the court’s decision, claiming Galaxy unfairly terminated the deal.
According to the June 9 filing, Laster further stated that Galaxy “did not waive the settlement agreement” and that the “alleged breaches of the agreement could not result in causative damages.” He said:
“There are no facts alleged that could make it reasonably conceivable that the exercise of the right of termination was inconsistent with the implied undertaking of good faith and fair dealing.”
The company BitGo has revealed a $77 million exposure to the unsuccessful cryptocurrency exchange FTX, which filed for bankruptcy in November.