Crypto custodian BitGo has accused its former merger partner Galaxy Digital of leaving their $1.2 billion tie-up agreement “prematurely,” court filings that became public yesterday show.
Earlier this month, Galaxy Digital was sued for $100 million for abandoning the deal to acquire BitGo, three months after it was announced. BitGo specified its allegations against Galaxy Digital in a verified complaint which became public on Monday.
"Galaxy’s decision to abandon the merger with BitGo prematurely had nothing to do with BitGo’s financial statements and everything to do with Galaxy’s massive losses and unanticipated predicament with the SEC," BitGo lawyers wrote.
Galaxy Digital stated in a release in August that its decision to break up the merger was due to BitGo’s "failure to deliver, by July 31, 2022, audited financial statements for 2021 that comply with the requirements of our agreement."
BitGo has now addressed this claim, clarifying that Galaxy Digital “concocted a pretext” that it failed to deliver these financial statements.
“This false assertion was purely an after-the-fact contrivance to justify abandoning the merger without paying the agreed-upon termination fee,” the documents read. The fee in question is $100 million, the same amount BitGo is suing for.
BitGo claimed that its financial audits were timely and audited by generally accepted auditing standards (GAAS) in the document. Galaxy Digital claimed that BitGo should have used a different auditing standard, although BitGo apparently never heard any concerns on the matter at the time, the filing shows.
The filing also states that Galaxy Digital was running late in managing its SEC registration due by the end of the year, which was part of the acquisition agreement. The risk of failure or delay to complete the registration would fall under Galaxy Digital's responsibility. With both regulatory and financial pressure, they were "desperate" to leave the agreement, the documents show.
Despite its losses of $554 million over one year, Galaxy Digital is still looking towards making new acquisitions over the coming months.
"We completely disagree with the allegations in the complaint," a Galaxy Digital spokesperson told The Block. "We are confident in our position and have filed a motion to dismiss the complaint."
This article was updated after publication to include a comment from Galaxy Digital.
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