Complete victory for Galaxy Digital related to termination of BitGo acquisition
We secured dismissal of breach of contract claims arising from Galaxy’s termination of a proposed $1.2 billion acquisition
On June 9, 2023, Vice Chancellor J. Travis Laster of the Delaware Court of Chancery granted in full Davis Polk’s motion to dismiss a breach of contract action filed against our client Galaxy Digital. Plaintiff BitGo Holdings had asserted claims against Galaxy for wrongful repudiation, breach of contract, and breach of the implied covenant of good faith and fair dealing, and sought damages of at least $100 million, in connection with Galaxy’s August 2022 termination of its proposed $1.2 billion acquisition of BitGo. Vice Chancellor Laster granted the motion with prejudice in a bench ruling after oral argument.
In granting Galaxy’s motion to dismiss, Vice Chancellor Laster adopted Davis Polk’s argument that Galaxy was entitled to terminate the parties’ merger agreement because BitGo failed to deliver contractually compliant financial statements by applicable deadlines in April and July 2022, which triggered Galaxy’s contractual right to terminate the agreement in the first half of August 2022. The court agreed that BitGo’s financial statements failed to satisfy specific requirements set forth in the merger agreement, finding that (1) financial statements that BitGo delivered in April 2022 failed to apply SEC staff interpretive guidance concerning the accounting treatment for digital assets held in custody on behalf of customers, which companies like BitGo are required to follow; and (2) revised financial statements that BitGo subsequently delivered in July 2022 contained a restriction on use from BitGo’s auditors that precluded Galaxy from filing the financial statements with the SEC as part of a registration statement required by the merger agreement. Vice Chancellor Laster also ruled that Galaxy’s valid termination right precluded BitGo’s claims of breach of express and implied terms of the merger agreement.
The Davis Polk litigation team included partners Andrew Ditchfield (who argued the motion) and Brian M. Burnovski, counsel Pascale Bibi and associates Kyra Macy Kaufman, Phoebe Roque and Lily Zhou. Partners Joseph A. Hall, Evan Rosen and Dan Gibbons provided corporate advice. All members of the Davis Polk team are based in the New York office.