Novogratz: SEC hurdles undercut $1.2B BitGo deal
Mike Novogratz told a Delaware court SEC accounting rules and probes made approval unlikely for Galaxy’s proposed $1.2B BitGo merger, a dispute tied to a $100M termination fee.
Mike Novogratz, founder of Galaxy Digital, testified on Tuesday in Delaware Chancery Court that Securities and Exchange Commission accounting and auditing requirements and probes into counterparties made regulatory approval unlikely for Galaxy’s proposed $1.2 billion acquisition of custody firm BitGo.
Novogratz testified he had been “pushing to get this deal done” but that the SEC, then led by Gary Gensler, imposed rules that made closing the transaction “very difficult.” The deal, announced in 2021 as the largest crypto merger at the time, was abandoned by Galaxy in August 2022 amid market turmoil after the collapse of the Terra ecosystem.
The case centers on whether Galaxy properly terminated the agreement and avoided a $100 million termination fee that BitGo seeks. BitGo maintains it met contractual conditions to receive the fee; Galaxy contends BitGo failed to provide required financial statements on time and concealed that it was the subject of a government probe.
BitGo CEO Mike Belshe testified on Monday that the SEC’s accounting changes, including guidance that customer crypto holdings be reported as liabilities, complicated audits and public filings. He testified that BitGo provided the requested documents and complained that Galaxy’s public comments damaged BitGo’s reputation. “This was incredibly damaging,” Belshe testified. “Galaxy is telling the world we can’t pass an audit.”
Novogratz disputed that Galaxy was under investigation and argued that an inquiry into BitGo alone would not have prevented closing. He acknowledged both companies expected regulatory clearance to be difficult under the SEC’s approach but said Galaxy continued to pursue the merger.
The contract allowed BitGo to collect the $100 million fee only if it delivered audited statements and other materials by a set deadline. BitGo argues it met those conditions; Galaxy contends late or incomplete information forfeited BitGo’s right to the fee.
The trial is scheduled to conclude this week. After closing arguments, the judge will decide whether BitGo is entitled to the termination payment.
The dispute comes after heightened regulatory scrutiny and tighter auditing standards that followed the market disruptions of 2022.
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