Galaxy Digital and BitGo Face Off in Court Over $100 Million Lawsuit Following Failed $1.2 Billion Merger

On May 22, 2026, Galaxy Digital, led by Mike Novogratz, and BitGo, a company specializing in crypto custody, met in a Delaware courtroom. This confrontation is expected to be a critical turning point in determining the outcome of the $100 million termination fee lawsuit related to the $1.2 billion merger agreement that fell through four years ago.

According to Bloomberg, both parties have entered full-scale oral arguments after the Delaware Supreme Court overturned the lower court's dismissal of BitGo's lawsuit in May 2024 and remanded the case. The massive merger, which was once expected to reshape the institutional crypto market landscape, has now become a legal dispute over technical accounting compliance.

On the morning of May 22, 2026, the atmosphere in the Delaware courtroom was filled with tension. BitGo is strongly demanding damages, claiming that Galaxy Digital unfairly terminated the contract to avoid paying the $100 million termination fee. The trial is expected to focus on testimony from executives of both companies and internal documents from the time the merger collapsed.

This appellate victory is the result of justice being served, and we are prepared to clearly prove Galaxy Digital's breach of contract in court.

The relationship between the two companies dates back to May 2021. At the time, Galaxy Digital agreed to acquire BitGo for approximately $1.2 billion in cash and stock, which was expected to mark the crypto industry's first billion-dollar M&A case. However, this ambitious plan collapsed after about a year due to rapid market changes and conflicts over accounting standards.

2022 Contract Termination and Audit Controversy

In mid-August 2022, Galaxy Digital announced the termination of the contract, citing BitGo's failure to submit the 2021 audited financial report specified in the contract terms by the deadline. Galaxy claimed that BitGo's failure to provide appropriate financial statements by July 31, 2022, constituted valid grounds for contract termination. Conversely, BitGo countered that Galaxy was making forced arguments to withdraw from the contract due to deteriorating market conditions.

• Whether BitGo delayed the submission of the 2021 audited financial report
• The point at which the obligation to comply with the SEC's Staff Accounting Bulletin No. 121 (SAB 121) arose
• The legal binding force of the July 31, 2022, deadline specified in the contract

In particular, the SAB 121 guidance announced by the U.S. Securities and Exchange Commission (SEC) at the time acted as a variable. This guidance, which requires custodial assets to be recorded as liabilities, complicated BitGo's accounting, and Galaxy Digital pointed out that BitGo's financial statements failed to meet contract requirements based on this. BitGo is countering by emphasizing that the guidance was not applicable at the time of the contract.

The initial phase of the legal battle favored Galaxy Digital. On June 9, 2023, the Delaware Court of Chancery dismissed BitGo's lawsuit, ruling that Galaxy's contract termination was a valid exercise of its rights. However, in May 2024, the Supreme Court overturned this decision, bringing the case back to square one, and as of 2026, a trial for full fact-finding is underway.

The financial situation Galaxy Digital faced at the time of the contract termination is also one of the main issues. In the second quarter of 2022, Galaxy Digital recorded a net loss of $554.7 million, and its stock price had plummeted 73% from a peak of $34 to $9. BitGo claims that this market downturn and financial pressure were the actual background that led Galaxy to seek an excuse to withdraw from the contract.

BitGo emphasizes that Galaxy unfairly rejected the contract using accounting issues as an excuse to avoid paying a $100 million termination fee. On the other hand, Galaxy Digital maintains its position that the failure to submit the audit report was a clear breach of contract and that they merely exercised their rights as specified in the contract. As the arguments from both sides remain deadlocked, the trial shows signs of becoming prolonged.

The outcome of this trial is expected to set an important precedent for large-scale merger and acquisition (M&A) contract practices in the virtual asset industry in the future. In particular, standards are expected to be established regarding how changes in regulatory accounting guidance affect ongoing contracts and how strictly audit requirements in contracts should be interpreted. This could serve as a guideline to prevent similar disputes in the future.

Ahead of the final ruling scheduled for November 2026, both sides are expected to continue intense discovery and arguments in the Delaware court. The market's attention is focused on the outcome of this lawsuit, which puts Mike Novogratz's leadership and Galaxy Digital's financial credibility at stake. Depending on which side the court rules in favor of, there is a high possibility of a shift in the landscape of the virtual asset custody market.