Big news in cryptoland this week as BitGo called its lawyers. This follows the news that Galaxy [TSE:GLXY] was terminating a buy out deal valued at $1.2bn. Galaxy said it would not be paying the $100m reverse termination fee under the agreement.
BitGo is a digital asset trust company which was founded in 2013 by Mike Belshe and Ben Davenport. It provides a multisignature Bitcoin wallet service which divides keys among a number of owners in order to manage risk. Wallets can be both hot and cold. It also provides custodial and non-custodial configurations to users.
Galaxy Digital Holdings stock in Canada has not been hugely affected by news of the suit. It had already come off heavily in August on the news that Galaxy was nixing the BitGo deal and was down 15% over a 30 day time frame in Toronto at time of writing. The stock is off by nearly 70% on a YTD basis.
“We believe Galaxy’s actions are improper and have taken appropriate steps to hold Galaxy accountable,” said BitGo in a statement issued on Tuesday. Our litigation with Galaxy will not have any impact on BitGo’s day-to-day business operations, our client services, our plans for the future, or our key mission.”
BitGo files $100m suit in Delaware
BitGo filed its suit with the Delaware Chancery Court. At time of writing court documents had yet to be made public. BitGo said it was moving with caution in case Galaxy chose to redact some of its allegations before the suit goes public. The timing is not good for Galaxy, which is pushing ahead with plans to list on Nasdaq. A $100m lawsuit with BitGo is not going to play well with investors.
BitGo is reacting to what it is calling misleading statements from Galaxy. It says it is regulated in multiple jurisdictions and has solid, GAAP, unqualified, on time audits from tier one auditors stretching back many years.
BitGo pushes ahead with wealth platform launch
BitGo has also just launched a new wealth platform for US registered investment advisors and broker dealers, to provide them with direct and easy access to digital assets. This integrates with traditional portfolio management systems like Orion and InvestCloud. “This platform addresses challenges faced by RIAs, such as managing time constraints, navigating regulatory issues, and providing consistency in service delivery,” BitGo said.
The Galaxy deal is being viewed as a considerable one within the digital assets space. Apart from the value of the deal itself, many larger scale investors are looking for secure and trusted avenues into the digital assets market which will not be compromised by bad actors. BitGo’s security services are considered some of the best in the industry. BitGo is of course at pains to defend its reputation at this juncture.
BitGo was approved as a qualified custodian of digital assets in 2018. It also received $15m in venture capital funding at that time, including from Galaxy. In March last year it received an NY Trust Charter which allowed it to enhance its position as a digital asset custodian.