Galaxy Digital backs away from Bitgo deal

After announcing plans to acquire Bitgo for $1.2 billion last year at the peak of the crypto frenzy, Galaxy Digital now says it is no longer pursuing the marriage.

Why it matters: Falling crypto asset prices had put the deal on many deathwatch lists. The two companies had tried to keep the deal going earlier this year, with Bitgo shareholders getting more stock as part of the renegotiated agreement. It didn't work.

Driving the news: Galaxy Digital — an institution-focused crypto management company founded by Mike Novogratz — said it terminated its agreement with Bitgo on Monday.

• According to Galaxy Digital, Bitgo had failed to produce audited 2021 financial statements in a timely manner.
• Galaxy Digital, therefore, will not have to pay a termination fee, the company said. Previously, Galaxy Digital would've had to pay about $100 million if the deal did not close by this year.

Bitgo has not yet responded to a request for comment.

Context: The deal had been struck when Galaxy Digital's stock was worth 77% more than it is today.

• In recent months, beyond its losses, Galaxy Digital has also faced headline risk from its exposure to the collapses of the Terra stablecoin ecosystem and Three Arrows.
• Today's news is a stark reminder that many 2021 deals remain on thin ice. Toro, a crypto and stock trading platform, also abandoned its SPAC merger earlier this year.

Of note: The deal would've added some 300 employees to Galaxy Digital, with the companies billing the marriage as a way to offer additional services to its institutional clients.