$1.2 billion BitGo acquisition deal falls through! Galaxy founder Novogratz testifies in court: It was the SEC that made the deal extremely difficult

Galaxy Digital founder Mike Novogratz appeared in the Delaware Court of Chancery on Tuesday to face off against BitGo CEO Mike Belshe over a failed $1.2 billion merger from 2021. Novogratz testified that the SEC under Gary Gensler made regulatory approval "extremely difficult," ultimately causing the collapse of what was then the largest crypto merger. BitGo is seeking a $100 million termination fee from Galaxy. The trial is expected to conclude this week, with the judge set to decide who bears the cost of the broken deal. This is an epic crypto contract dispute spanning nearly five years. Galaxy Digital founder Mike Novogratz took the witness stand at the Delaware Court of Chancery on Tuesday to confront BitGo CEO Mike Belshe. At the heart of the dispute is the $1.2 billion merger—the largest in the crypto industry at the time—which fell apart following the Terra collapse. According to court records obtained by Bloomberg, Novogratz stated in court that he "desperately wanted to get the deal done," but both Galaxy and BitGo eventually realized that under the regulatory approach of then-SEC Chair Gary Gensler, it was nearly impossible for regulators to approve the merger. "(The SEC) made it extremely difficult," Novogratz said bluntly in his testimony. In May 2021, Galaxy Digital announced its acquisition of crypto custodian BitGo for $1.2 billion. At the time, the market was at the peak of a bull run, and institutional investor enthusiasm for cryptocurrencies was at an all-time high. The deal was seen as a major signal that the crypto industry was entering the Wall Street mainstream. Galaxy itself is a digital asset financial services group founded by former Wall Street macro trader Novogratz, while BitGo is a veteran custodial infrastructure provider in the industry. However, the good times did not last. In August 2022, against the backdrop of the chain reaction triggered by the Terra/LUNA collapse, the bankruptcy of Three Arrows Capital, and the near-freezing of the entire crypto credit market, Galaxy announced the termination of the acquisition. Galaxy’s stated reason at the time was that BitGo failed to provide the required financial statements by the deadline. BitGo immediately filed a lawsuit, demanding that Galaxy pay a $100 million termination fee and accusing Galaxy of concealing the fact that BitGo was under investigation by U.S. regulators at the time. Galaxy countersued, claiming that BitGo had lost its right to the termination fee by failing to deliver financial documents on time. During the trial, BitGo’s Belshe testified aggressively on Monday: "Galaxy told the world we couldn't pass an audit—that is a deeply damaging accusation." Novogratz emphasized that the SEC's special accounting standards (requiring companies to record crypto assets held for clients as liabilities) made the reconciliation of financial statements for the entire deal extremely complex. Although BitGo negotiated the inclusion of a termination fee clause and a deadline for submitting financial statements, the regulatory uncertainty from the SEC ultimately made it impossible to save the contract. It is worth noting that this lawsuit is set against the backdrop of the SEC's comprehensive crackdown on the crypto industry during the Gensler era. Since 2021, the SEC has initiated enforcement actions against multiple crypto exchanges and custodians, and through Staff Accounting Bulletin 121 (SAB 121), required financial institutions to list client crypto assets as liabilities on their balance sheets—an accounting standard widely considered by the industry to be one of the biggest obstacles for traditional financial institutions entering the digital asset custody market. With Paul Atkins taking over as SEC Chair in 2025 and the Trump administration pushing for more crypto-friendly regulatory policies, SAB 121 has been repealed, but the legal disputes left over from the Gensler era are still being settled in court one by one. The contract battle between Galaxy and BitGo is one of the most symbolic historical remnants of that period of regulatory chill. For the Asian market, the impact of this ruling cannot be underestimated. Galaxy Digital has a presence in Asia, and BitGo also provides custodial services in the Asia-Pacific region through locations like Singapore. If the judge rules that BitGo is entitled to the $100 million termination fee, it could set a judicial precedent for the "enforceability of termination clauses" in crypto M&A contracts, having a profound impact on the design of cross-border merger contracts for Asian crypto companies in the future. The trial is expected to conclude this week, and the judge at the Delaware Court of Chancery will rule on whether BitGo is entitled to the $100 million termination fee. Given the high authority of the Delaware Court of Chancery in U.S. corporate and contract law, the verdict in this case could become an important reference for subsequent similar crypto contract disputes. As of press time,