Tuesday, December 6

Novogratz’s Galaxy Digital Discloses FTX Exposure


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(Bloomberg) — Galaxy Digital Holdings Ltd., the crypto financial services firm founded by billionaire Michael Novogratz, disclosed $76.8 million exposure to the collapsed exchange FTX.com and expects more challenging industry environment in the weeks ahead from the turmoil.

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Galaxy, which uses FTX.com to hold assets, said of its exposure, $47.5 million worth of assets is currently in the withdrawal process, the company disclosed in its third-quarter results. FTX halted withdrawals Tuesday, citing a liquidity crunch, and agreed to a buyout offer from Binance Holdings.

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Galaxy’s net comprehensive loss was $68.1 million, compared to a $517.9 million gain in the year-ago period, primarily due to unrealized losses on investments, driven by reduced valuations under external market conditions. Co-President Damien Vanderwilt will step down in mid-January , becoming a senior advisor and board director.

On the fallout from FTX.com, “we are going to have to be nimble and agile for the next 2-to-12 weeks as this digests, and people really make sense of what happened,” Novogratz said during a conference call. He expects crypto prices will no longer driven by events like FTX and will be back to being correlated to macro market conditions “within a quarter.”

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Assuming the Republican takes control of the US House of Representatives after the mid-term election, he expects “a much more aggressive Congress when it comes to the SEC, the CFTC,” Novogratz said.

Galaxy said it maintained a liquidity position of $1.5 billion as of September. That includes $1 billion in cash.

Galaxy planned to cut about 15% of its headcount. He doesn’t expect that to change due to the fallout from FTX.com, Novogratz said on the call. The New York-based company had 395 employees globally as of the end of the third quarter.

The crypto industry has been grappling with renewed turmoil in the wake of a plunge in token prices in the spring. Prices have tumbled this week as the failure of FTX increased concern that there is more trouble brewing within the industry and among some of its top players , following widespread layoffs and earlier bankruptcies of major firms including Three Arrows Capital, Voyager Digital and Celsius Network.

Galaxy’s mining unit incurred a net comprehensive loss of $34.9 million in the quarter, citing increased operating expense, against the backdrop of its largest third-party hosting provider reducing capacity due to market conditions, rising energy prices and constrained access to capital markets.

Shares of Galaxy slumped 14% to $2.97 as of 9:33 am in New York. They’ve dropped around 84% this year.

(Adds Novogratz commentary from earnings call.)



financialpost.com

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