The Delaware Supreme Court has reinstated BitGo's $100 million lawsuit against Galaxy Digital over a failed merger.
The Delaware Supreme Court has reinstated a $100 million lawsuit filed by BitGo against financial services company Galaxy Digital concerning a botched $1.2 billion merger agreement. The decision overturns a previous dismissal by the Delaware Court of Chancery.
In August 2022, BitGo initiated legal action against Galaxy Digital, claiming that Galaxy had "intentionally" violated their May 2021 merger agreement when Galaxy experienced substantial financial losses during the bear market. BitGo is seeking compensatory damages for what it considers a breach of contract. Galaxy Digital, led by Mike Novogratz, countered by attributing the termination of the merger to BitGo's inability to produce certain audited financial statements in a timely fashion, labeling BitGo's allegations as baseless.
Delaware Chancery Court Vice Chancellor J. Travis Laster had previously ruled in June 2023 that Galaxy Digital had a "valid basis" to end the agreement, citing "non-compliant" financial documents provided by BitGo. However, after an appeal by BitGo, the Delaware Supreme Court found the language in the merger agreement to be "ambiguous." The Supreme Court's ruling on May 22 highlighted that there were reasonable interpretations of what constituted acceptable documentation from both parties, necessitating a reconsideration of the case.
"We believe justice prevailed on appeal, and we are delighted to move forward with this case in the Chancery Court," stated R. Brian Timmons, a partner at Quinn Emanuel, representing BitGo.
The successful appeal, lodged on February 7, grants BitGo another opportunity to pursue its claims against Galaxy Digital. The reversal by the state's highest court indicates that additional evidence may be considered to clarify the ambiguity in the merger agreement.
Galaxy Digital, which had planned to incorporate BitGo as part of its public offering in the United States, has expressed its intent to "continue to vigorously defend ourselves" in light of the Supreme Court's decision. A spokesperson for Galaxy Digital expressed confidence in the strength of their defense.
The case's revival comes after Galaxy Digital disclosed an approximate $77 million exposure to the collapsed cryptocurrency exchange FTX before the latter's bankruptcy filing in November 2022. The outcome of this renewed legal battle may carry significant implications for both companies, with the Chancery Court now set to re-examine the case in detail.
