Judge rules BitGo lawsuit against Galaxy Digital can proceed

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• BitGo has been given a new opportunity to sue Galaxy Digital over their failed $1.2 billion merger.
• The Delaware Supreme Court has overturned an earlier ruling dismissing BitGo’s lawsuit over the definition of financial statements.
• BitGo sued Galaxy Digital in 2022 after the company called off the merger shortly before it was due to close in 2021.

Cryptocurrency Custodian BitGo was recently given a new opportunity to pursue legal action against financial services company Galaxy Digital over its failed $1.2 billion merger. The Delaware Supreme Court overturned an earlier ruling that dismissed BitGo’s lawsuit based on the definition of financial statements that BitGo allegedly withheld from disclosure. The custodian Sued Galaxy Digital in 2022 The previous year, the company called off a merger just days before it was due to close.

Digital Products Galaxy Digital withdraws from merger

The two companies signed an agreement in May 2021, aiming to enable BitGo to offer digital asset infrastructure services to a wider range of corporate, institutional and high-net-worth clients. However, the merger faced significant challenges, and just before the deal was due to close, Galaxy Digital issued a press release announcing its decision to abort the acquisition.

The company cited BitGo’s failure to submit its audited financial statements for 2021 by the set deadline of July 31, 2022 as the main reason for the termination, and emphasized that no termination fee would be incurred. BitGo responded strongly, filing a press release a few hours later announcing its intention to hold Galaxy Digital responsible for the improper termination of the contract.

At the time, R. Brian Timmons, BitGo’s general counsel at Quinn Emanuel, said Galaxy Digital owed BitGo a $100 million termination fee or bad faith damages that could be more. The fee was promised in March 2022 as an inducement for the extension of the merger agreement, but was not paid, prompting BitGo to take legal action.

Digital Products Definition of “Financial Statements”

Delaware Court of Chancery Vice Chief J. Travis Laster ruled last June that Galaxy had a “valid basis” to terminate the agreement because BitGo had provided Galaxy with “non-compliant” financial statements. However, following BitGo’s appeal, the Delaware Supreme Court identified ambiguity in the definition of “financial statements” in the merger agreement. The court reversed the original ruling, finding that both BitGo and Galaxy Digital had given reasonable interpretations of the documents requested.

The decision breathes new life into BitGo’s lawsuit, allowing the company to challenge Galaxy Digital’s termination of the merger agreement and seek monetary damages.