Galaxy Digital founder Michael Novogratz and BitGo CEO Mike Belshe testified this week in Delaware Chancery Court as the two crypto firms resumed their legal battle over the collapse of a 1.2 billion dollar acquisition agreement first announced in 2021. BitGo is seeking at least 100 million dollars in reverse termination fee damages, alleging that Galaxy wrongfully abandoned the transaction during the 2022 market downturn. The case, revived by the Delaware Supreme Court in 2024 after lower court proceedings initially favored Galaxy, has become one of the most closely watched contract disputes in the digital asset industry.

Origins of the Deal and the Regulatory Hurdle

Galaxy Digital agreed to acquire BitGo in May 2021, during a period of elevated crypto valuations. Under the proposed terms, Belshe was set to join Galaxy as deputy CEO and take a seat on the company’s board, while the combined entity planned to list shares on Nasdaq, a step that required approval from the Securities and Exchange Commission. The transaction, valued at approximately 1.2 billion dollars, was expected to become the largest merger in the crypto industry at the time.

However, the deal encountered mounting obstacles as crypto markets weakened through 2022. Both companies grew concerned that the SEC, then chaired by Gary Gensler, would not approve the transaction. Novogratz testified that he explored restructuring the merger through Canada, where Galaxy was already publicly listed, in an effort to bypass SEC-related hurdles. The introduction of SEC Staff Accounting Bulletin 121 in May 2022, which established new accounting requirements for companies safeguarding digital assets, added further complexity to the regulatory landscape surrounding the deal.

The Financial Statement Dispute

Galaxy terminated the acquisition in August 2022, citing BitGo’s failure to deliver audited financial statements for 2021 by a July 31 deadline specified in the merger agreement. Galaxy argued at the time that the missed deadline relieved it of any obligation to pay a termination fee. The Delaware Supreme Court later ruled that if BitGo failed to submit compliant financial statements by that date, Galaxy had contractual grounds to walk away without paying the reverse termination fee.

BitGo has consistently disputed this account. Belshe testified this week that the required documents had been delivered and called Galaxy’s public explanation for ending the deal “incredibly damaging,” arguing that it created a false impression that BitGo was unable to complete an audit. BitGo further alleged that Galaxy failed to make reasonable efforts to complete the merger and concealed information about investigations by United States authorities that could have affected the regulatory approval process.

Broader Industry Implications

The outcome of the trial, which is expected to conclude with a judge’s decision in the coming weeks, carries implications beyond the two companies involved. The case tests how standard M&A contractual protections, including reverse termination fees and closing condition deadlines, function under the unique regulatory pressures facing the crypto industry. Both companies have continued to build their businesses since the deal collapsed. BitGo went public in January 2026 and reported 3.77 billion dollars in revenue for the first quarter, a 112.6 percent year-over-year increase, though it posted a 60.7 million dollar net loss. Galaxy, meanwhile, recently secured a BitLicense and Money Transmission License from New York regulators for its GalaxyOne Prime NY institutional trading and custody unit.

Risks and Uncertainties

The trial’s outcome remains difficult to predict. While the Delaware Supreme Court’s 2024 decision to revive the case suggests that BitGo’s claims have legal merit, Galaxy’s defense rests on specific contractual language around the financial statement deadline that could prove dispositive. Legal experts have noted that Delaware courts generally enforce merger agreement terms strictly, which could favor Galaxy’s interpretation. The case also highlights the broader challenge of structuring crypto-industry M&A transactions in an environment where regulatory timelines and requirements can shift rapidly, a factor that may deter future deal-making regardless of the verdict.

About XT Exchange

Founded in 2018, XT Exchange is a leading global digital asset trading platform, serving over 12 million registered users across more than 200 countries and regions, with an ecosystem reach exceeding 40 million. XT Exchange supports 1,300+ tokens and 1,300+ trading pairs, offering a wide range of trading options, including spot, margin, and futures, alongside a secure RWA (Real World Assets) marketplace. Guided by the vision “Xplore Crypto, Trade with Trust,” the platform strives to provide a secure, trusted, and intuitive trading experience.

Join the XT Exchange Community: X (Twitter) | Telegram | Facebook | LinkedIn | Medium | YouTube

Disclaimer: XT Exchange reserves the right, at its sole discretion, to modify, amend, or cancel this announcement at any time for any reason without prior notice.