Mike Novogratz's Crypto Firm Lost $134 Million in the First Quarter

(Bloomberg) -- Galaxy Digital LP, the crypto-focused merchant bank founded by Mike Novogratz, posted a $134 million loss in its first quarter, when the value of Bitcoin and other cryptocurrencies plunged.

Galaxy Digital’s trading business had $13.5 million of losses and an additional $85.5 million of unrealized losses on digital assets, plus a $1.1 million paper loss on investments, the New York-based firm said July 25 in its first quarterly disclosure. The eight-month-old firm also posted $22.9 million paper losses on investments in its principal investing business.

The price of Bitcoin, which touched a record high of $19,511 on Dec. 18, plunged 52 percent in the first three months of the year, with other cryptocurrencies tracking similar declines in the period.

Mike Novogratz's Crypto Firm Lost $134 Million in the First Quarter

This is the first time Galaxy Digital released financial statements, a requirement by Canadian regulators for Novogratz to fulfill his plan to list the merchant bank on Canada’s TSX Venture Exchange. The company was formed at the end of November. The former Wall Street macro trader aims to build an institutional-quality merchant banking business dedicated to cryptocurrencies and blockchain-based ventures that’s active in trading, principal investing, asset management and advisory work.

“I am very proud of the progress that we have made since the beginning of the year," Novogratz, who’s the chief executive officer, said in a statement. “We have assembled a world-class team with deep institutional knowledge and expertise and have also made significant strides in scaling our four core business lines."

Galaxy Digital had $281.7 million of assets as of March 31, including $225.8 million in digital assets and investments, according to the disclosures.

Novogratz laid out a series of transactions in January that would raise C$250 million ($192 million) and, through a holding company, list shares of his Galaxy Digital on Canada’s junior stock exchange. The plans require Galaxy to buy Canadian crypto startup First Coin Capital Corp. and then merge with a Canadian shell company, Bradmer Pharmaceuticals Inc., through a reverse takeover. Bradmer, to be renamed Galaxy Digital Holdings, will own an interest in the merchant bank and be listed on the Canadian exchange. The firm expects to have more than 70 employees after the combination.

Novogratz aimed to have the deals done by the end of the first quarter, but additional regulatory demands delayed his plans. The hedge fund manager has contributed $302 million in crypto assets to build the merchant bank and his home office provided a $130 million credit line to fund operations until the transactions close. As of the end of March, the firm owed $78.8 million under the revolving loan. Outside investors have provided an additional $242 million in capital to the business.

Galaxy Digital said it has invested $86.8 million across 11 investments and six add-on acquisitions this year. Those include investments in crypto asset lending platform BlockFi and AlphaPoint, which helps institutions launch cryptocurrency exchanges and tokenize assets. The firm’s asset management business partnered with Bloomberg LP to offer the Bloomberg Galaxy Crypto Index.

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