$1.2 billion acquisition of BitGo-related deal collapses! Galaxy founder Novogratz testifies: it’s the SEC that makes trading extremely difficult

Galaxy Digital founder Mike Novogratz appeared in Delaware's Court of Chancery on Tuesday, facing off against BitGo CEO Mike Belshe over a failed merger worth $1.2 billion in 2021. Novogratz testified that under the leadership of Gary Gensler, the SEC made regulatory approval "extremely difficult," ultimately causing the largest crypto merger at the time to fall apart; BitGo is demanding Galaxy pay $100 million in damages. The trial is expected to conclude this week, with the judge ruling on who should bear responsibility for the failed deal.
(Background summary: Analyzing Michael Novogratz: A Wall Street outsider and the beginning of Galaxy Digital's legend)
(Additional background: The dawn of crypto "banking" in the U.S.: Five giants obtain federal licenses, shaking the trillion-dollar settlement industry)

Table of Contents

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• The birth and demise of the largest crypto merger in history worth $1.2 billion
• The battle over $100 million in breach of contract damages
• The legacy of SEC regulation era: frequent crypto contract disputes
• Court session ends this week; judge to make a decision

This is an epic crypto contract dispute spanning nearly five years. Galaxy Digital founder Mike Novogratz personally took the stand in Delaware’s Court of Chancery on Tuesday, engaging in a direct confrontation with BitGo CEO Mike Belshe—the core of their dispute is the $1.2 billion crypto industry mega-merger in 2021, which ultimately collapsed after Terra’s crash.

According to court records obtained by Bloomberg, Novogratz stated in court that he "tried very hard to push this deal through," but both Galaxy and BitGo ultimately realized that under the regulatory policies of then-SEC Chairman Gary Gensler, the merger was almost impossible to get approved.

"(SEC) made everything extremely difficult," Novogratz testified straightforwardly.

The birth and demise of the largest crypto merger in history worth $1.2 billion

In May 2021, Galaxy Digital announced it would acquire crypto custodian BitGo for $1.2 billion, at a time when the market was at a bull run peak, and institutional investors’ enthusiasm for cryptocurrencies was unprecedented. This deal was seen as a significant signal that the crypto industry was officially entering mainstream Wall Street—Galaxy itself was founded by former Wall Street macro trader Novogratz, and BitGo was a well-established custody infrastructure provider.

However, the good times did not last. In August 2022, amid the chain reaction triggered by Terra/LUNA’s collapse, Three Arrows Capital’s bankruptcy, and the crypto lending market nearly freezing, Galaxy announced it was terminating the acquisition. The reason given was that BitGo failed to provide the required financial statements within the deadline.

The battle over $100 million in breach of contract damages

BitGo immediately filed a lawsuit, demanding Galaxy pay $100 million in termination fees, accusing Galaxy of concealing that BitGo was under investigation by U.S. regulators at the time. Galaxy countered that BitGo failed to deliver financial documents on time, losing the right to claim damages.

During the trial, Belshe testified passionately on Monday: "Galaxy publicly claimed we couldn’t pass an accounting audit—this is a highly damaging accusation."

Novogratz emphasized that SEC’s special accounting standards (requiring companies to record customer-held crypto assets as liabilities) made the financial statements of the entire deal extremely complex. Although BitGo negotiated to include breach clauses and deadlines for financial reporting, the regulatory uncertainty under SEC ultimately made it impossible to save the deal.

The legacy of SEC regulation era: frequent crypto contract disputes

It’s worth noting that this lawsuit is set against the backdrop of the Gensler-era SEC’s crackdown on the crypto industry. Since 2021, the SEC has launched enforcement actions against multiple crypto exchanges and custodians, and through Staff Accounting Bulletin 121 (SAB 121), has required financial institutions to list customer crypto assets as liabilities on their balance sheets—an accounting standard widely regarded as one of the biggest hurdles for traditional financial institutions entering the digital asset custody market.

With Paul Atkins set to succeed Gensler as SEC Chair in 2025, and the Trump administration pushing for more crypto-friendly regulation, SAB 121 has been abolished. However, the legal disputes left by the Gensler era are still being sorted out in courts. The Galaxy-BitGo case is one of the most symbolic legacy cases from that period of regulatory chill.

For Asian markets, the impact of this ruling should not be underestimated. Galaxy Digital has offices in Asia, and BitGo provides custody services in Singapore and other Asia-Pacific regions. If the judge rules that BitGo should receive the $100 million damages, it could set a judicial precedent for the enforceability of termination clauses in crypto M&A contracts, with far-reaching implications for future cross-border mergers and acquisitions in Asia’s crypto industry.

Court session ends this week; judge to make a decision

The court session is expected to conclude this week, with the Delaware Court of Chancery’s judge ruling on whether BitGo is entitled to the $100 million damages. Given the court’s high authority in U.S. corporate and contract law, the verdict could serve as an important reference for similar future crypto contract disputes.

As of press time, both Galaxy Digital and BitGo have not issued further comments on the proceedings.