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Novogratz’s Galaxy Digital Quarterly Loss More Than Doubles on Crypto Collapse

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Galaxy Digital Holdings Ltd., the crypto financial services firm founded by billionaire Michael Novogratz, said its second-quarter loss more than doubled against a backdrop of digital asset price declines. 

The net comprehensive loss was $554.7 million, compared with $182.9 million in the year-ago period, primarily due to unrealized losses on digital assets and on investments in its trading and principal investments businesses. That was partially offset by profitability in its mining business, the company said in a statement Monday.

After the deleveraging of crypto lending platforms, “we’ve seen a bounce from there as the fear went away,” said Novogratz, chief executive officer of Galaxy, during the earnings call. “Now the industry needs new energy,” such as the upcoming Ethereum upgrade known as the Merge, which has led to a rally in price of the second largest token, he added. 

Galaxy has filed a claim against Three Arrows Capital, and the exposure was small and hedged within the context of its balance sheet, Novogratz said. Galaxy’s credit portfolio took an impairment of about $10 million in the quarter ended June 30, for which it took full loan-loss reserve and is actively working to recover. 

On its credit business, “we’ve got market share to gain there as most of our competitors have been wounded and we’re not,” said Novogratz. The New York-based company has over $1.5 billion in liquidity, including over $1 billion in cash, he said.  

Novogratz, a big promoter of Terraform Labs, the company behind collapsed tokens Terra and Luna, said during a July conference that the incident showed both the industry and retail investors “had very, very little concept of risk management.” 

Galaxy is also looking for merger and acquisition opportunities. Mining is one sector that are facing the most challenges now, Novogratz said. “We think we’ve got a role to play in both lending and potentially consolidation in that space.”

Galaxy’s asset management unit was managing nearly $1.7 billion as of June 30, a 40% decrease from prior quarter. The firm said it still intends to complete its plan to become a Delaware-incorporated company and list on the Nasdaq upon completion of ongoing SEC review, subject to stock exchange approval of a listing. 

Toronto-listed shares of Galaxy jumped 20% on Monday, though they are still down more than 60% this year. 

Adds commentary from earnings call
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 8/9/2022

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