August 16, 2023 at 15:35 GMTModified date: August 16, 2023 at 15:35 GMT
August 16, 2023 at 15:35 GMT

BitGo raises $100m after Galaxy lawsuit loss: Bloomberg

BitGo, a cryptocurrency custodian, has raised $100million, reaching a valuation of $1.75billion, according to a new report by Bloomberg.

BitGo raises $100m after Galaxy lawsuit loss: Bloomberg

BitGo, a cryptocurrency custodian, has raised $100million, reaching a valuation of $1.75billion, according to a new report by Bloomberg.

BitGo specialises in the security of crypto assets, particularly through the protection of private keys. These are sometimes stored in physical vaults. 

The company is currently acting as the custodian for the creditors of the defunct cryptocurrency exchange FTX.

BitGo’s client list also includes blockchain developer Mysten Labs, financial services company Swan Bitcoin, and Nike.

The new injection of funds will be used for strategic acquisitions and to expand BitGo’s custodian infrastructure. 

BitGo’s recent funding success

All of BitGo’s $100m in new funds comes from entirely new investors, according to Mike Belshe, BitGo’s chief executive officer.

After what has been challenging year for US crypto companies, Belshe told Bloomberg that “regulatory safety is on everybody’s minds right now”. 

Pointing towards the “rough” market conditions, Belshe emphasised BitGo’s dedication to licensing and regulation. He suggested it has strongly positioned the company in a challenging bear market.

The recent funding round attracted investors from both the US and Asia, with some of them being new to the cryptocurrency sector. Previous investors in BitGo have included Goldman Sachs, DRW Holdings, and Galaxy Digital Ventures.

This new valuation marks a significant increase from 2021 when BitGo was in discussions to be acquired by Galaxy. The deal was estimated at $1.2bn, but was eventually abandoned.

Belshe indicated that the newly acquired funds would be allocated, in part, for strategic acquisitions. He mentioned that at least two deals are currently under consideration.

Announcing the investment, Belshe told CoinDesk: “Not only are we seeing growing demand for regulated custody solutions in the United States, but we’re also seeing the demand on a global scale.”

BitGo abandons Prime Trust acquisition

The new funding announcement comes off the back of BitGo revealing it had terminated plans to acquire rival custodian firm Prime Trust. 

In June, an initial agreement had been reached to acquire Prime Trust for an undisclosed amount. However, following extensive deliberations, BitGo decided against the acquisition, according to a recent company tweet. 

“This decision was not made lightly and BitGo remains committed to our mission to deliver trust in digital assets,” the company said. 

Prime Trust was recently ordered by the Eighth Judicial District Court of Nevada to cease its operations. Now it is potentially looking at massive layoffs, former employees told CoinDesk. 

The redundancies would add to the layoffs earlier this year, which saw one-third of Prime Time’s employees cut. 

Galaxy lawsuit loss 

BitGo’s abandonment of the Prime Time deal comes after the lawsuit with Galaxy Digital Ventures recently came to an end.

In 2021, Galaxy planned on acquiring BitGo in a deal estimated at $1.2bn. However, a year later, the deal was terminated. Galaxy alleged there was a breach of contract as BitGo failed to hand over specific financial statements.

BitGo then filed a lawsuit against Galaxy. The custodian alleged there was an intentional breach of the acquisition agreement. BitGo sought $100m in damages from Galaxy for this breach. 

However, in June 2023, a US court dismissed BitGo’s claims. This was closely followed by BitGo’s decision to cancel its acquisition of Prime Trust and its announcement that it raised $100m in fundraising.