SecProbe.io

United States securities and exchange commission logo
May 12, 2023
Michael Novogratz
Chief Executive Officer
Galaxy Digital Inc.
300 Vesey Street
New York, NY 10282
Re:Galaxy Digital Inc.
Amendment No. 1 to Registration Statement on Form S-4
Filed February 9, 2023
File No. 333-262378
Dear Michael Novogratz:
            We have reviewed your amended registration statement and have the following
comments.  In some of our comments, we may ask you to provide us with information so we
may better understand your disclosure.
            Please respond to this letter by amending your registration statement and providing the
requested information.  If you do not believe our comments apply to your facts and
circumstances or do not believe an amendment is appropriate, please tell us why in your
response.
            After reviewing any amendment to your registration statement and the information you
provide in response to these comments, we may have additional comments.  Unless we note
otherwise, our references to prior comments are to comments in our February 11, 2022 letter.
Amendment No. 1 to Registration Statement on Form S-4
General
1.Please revise your prospectus summary to specifically address the risks and potential
consequences to your business, financial condition and results of operations that you
describe in the risk factor on page 52 regarding transactions with digital assets that are
securities.
2.We note your disclosure in the "Securities Regulation Generally" section in which you
describe your process and procedures for determining the federal securities law status of
digital assets.  Please revise to discuss how often you update or reconsider your analysis
of each digital asset with which you transact, whether in connection with your policies and
procedures or in response to judicial or regulatory developments, including a discussion of

 FirstName LastNameMichael Novogratz
 Comapany NameGalaxy Digital Inc.
 May 12, 2023 Page 2
 FirstName LastName
Michael Novogratz
Galaxy Digital Inc.
May 12, 2023
Page 2
whether and to what extent any of your determinations have changed over time.
3.We note your disclosure in the first risk factor on page 78, and under the Government
Regulation discussion on page 237, that Galaxy Bahamas Ltd., which will serve as
extensions of your trading business under Galaxy Trading ("GT") and your custody and
money services operation under GalaxyOne Prime LLC ("GPL"), will also offer market
making and staking services.  We further note your disclosure on page 24 that you are
acquiring the assets of GK8, an institutional digital asset self-custody platform, and that
GK8's website markets its staking services as letting customers earn interest on digital
assets by using them to securely validate blockchain transactions.  Please expand your
disclosure to describe your current and planned activities with respect to staking in greater
detail.  Without limitation, your disclosure should address program features, whose crypto
assets are being staked and who is eligible to participate.  Additionally, please provide us
with your analysis as to how your staking program is, and will be, executed in compliance
with the federal securities laws and provide related risk factor disclosure.
4.As part of your response to prior comment 1, you state the following:

"Trading.  In this business line, the Company, through its subsidiaries, primarily provides
spot, derivative and financing liquidity to institutional clients, counterparties and venues
that transact in cryptocurrencies and other digital assets.  Although the Company does
transact in the trading business line in certain digital assets that could potentially be
considered investment securities under the Investment Company Act, this business line is
not primarily engaged in investment company activity."

Please explain further how GD LP does not meet the definition of an investment company
under section 3(a)(1)(A) of the Investment Company Act, particularly as it is engaged in
the business of trading assets that are potentially securities.
5.Please describe the ownership interest of the Company and its affiliates in the funds and
other investment vehicles managed by the Asset Management Entities.
6.You define Primary Company Business as "the business of providing technology-driven
diversified financial services, focused on digital asset trading (including market
intermediary services for digital asset lending and borrowing), digital asset mining
operations, asset management and investment banking…"  Given that the Company is
"focused on digital asset trading," and is treating digital assets other than BTC or ETH as
securities, please provide additional support for your conclusion that the historical
development and public representations of the Company weigh in favor of the Company
not falling within the investment company definition under section 3(a)(1)(A).
7.As part of your response to prior comment 1, you state that Galaxy Digital Holdings Ltd.
("GDHL") was established with the intention of forming a full-service, institutional
merchant banking business in the cryptocurrency and blockchain space.  Please explain
how this is consistent with the Primary Company Business, which includes activities that
generally are not associated with merchant banking.  Please reconcile that difference.

 FirstName LastNameMichael Novogratz
 Comapany NameGalaxy Digital Inc.
 May 12, 2023 Page 3
 FirstName LastName
Michael Novogratz
Galaxy Digital Inc.
May 12, 2023
Page 3
8.Please explain whether the two digital trading firms that GDHL acquired in 2020 and
2021 are involved in trading securities.
9.Please provide the unconsolidated financial statements that formed the basis for your
calculation of assets for purposes of Section 3(a)(1)(C) of the Investment Company Act.
Please provide such information as of a more recent date than December 31, 2022.
10.As part of your response to prior comment 1, you state the following:

"In terms of the income factor, for the four fiscal quarters ended December 31, 2021, the
Company’s net income derived from its trading business line constituted
approximately $985.3 million or 57% of its total net income, and net income from its
principal investments constituted $954.9 million or 56% of its total net income for the
same period." (Emphasis added).

Please describe what is included in the income calculation for the trading business line.
For example, does this consist mostly of transaction fees, spreads, or from the disposition
of assets?
11.As part of your response to prior comment 1, you state that the Company's net income
from the principal investments business line represented 74%, 28%, and 56% of its total
net income for the fiscal years 2019, 2020, and 2021, respectively.  Please provide gross
income figures for each period, and gross and net income figures for fiscal year 2022.
12.Please explain how Galaxy Digital LLC ("GD LLC") identifies interested Eligible
Contract Participants willing to engage in financial transactions.
13.In your response letter, please expand on the information provided in Annex I to provide
details about the loans that GD LLC has entered into, including the number of loans and
their USD value, during 2021 and since February 2022.
14.Footnote 25 of your response letter dated April 18, 2022 states that "GD LLC’s inventory
of digital assets consists primarily of USD Coin, Solana, Bitcoin, Cardano and Ethereum.
GD LLC's remaining assets are a mix of other assets, including its interests in various
majority-owned subsidiaries."  Please tell us what percentage of GD LLC's total assets is
comprised of "remaining assets," and what are those assets?  Additionally, tell us how
much of GD LLC's gross income is derived from these "remaining assets?"
15.As part of your response to prior comment 1, you note the following:

"In addition, income generated by GD LLC’s Digital Asset Loan business constituted the
majority of GD LLC’s total unconsolidated gross income for the last four fiscal quarters
combined, thus satisfying the requirement under Section 3(c)(2) that its 'gross income
normally [be] derived principally from such business and related activities.'"

Please provide a gross income breakdown of GD LLC for each of the last four quarters,
including specification of different types of income sources.

 FirstName LastNameMichael Novogratz
 Comapany NameGalaxy Digital Inc.
 May 12, 2023 Page 4
 FirstName LastName
Michael Novogratz
Galaxy Digital Inc.
May 12, 2023
Page 4
16.Please provide separate investment company status analyses for Galaxy Digital Principal
Investments and all subsidiaries that fall within this business line.
17.Please confirm supplementally that the amended registration statement incorporates the
disclosure set forth in response to our prior comment 3.
18.We note your definition of "stablecoin" in your glossary on page 317 and discussion of
stablecoins in your Prospectus Summary, Risk Factors, MD&A and Information About
Galaxy.  Please revise your definition and related disclosures to clarify which stablecoins
are collateralized or backed by reserves and discuss how such reserves are held.  Also
discuss a stablecoin holders’ rights to such collateral in the event of the bankruptcy or
insolvency of the issuer or in the event the value of the stablecoin becomes unpegged to
the value of the underlying currency or commodity.  Additionally, balance your disclosure
by discussing the relative stability stablecoins offer in light of recent events in the markets
for stablecoins.  Further, update the current value of circulating U.S. dollar stablecoins on
page 20 as of the latest most practicable date, or advise.
19.Please revise where appropriate to discuss any material impacts of the domestication on
you current business relationships.  As a non-exclusive example, clarify whether the
domestication will have a material effect on your ability to transact with any persons or
entities outside the U.S., including offshore crypto platforms.
A Letter from Michael Novogratz, our Founder and Chief Executive Officer, page v
20.We note your response to prior comment 24.  Please expand to provide support for your
statement in the second to last paragraph on page vi that, "the entrance of institutions and
human capital into the space continues unabated."
Our Products and Services, page 16
21.We note the revisions you made on pages 17 and 18 in response to prior comment 25.
Please expand to address the following:
•Identify the specific third party custodians and trading platforms where GPL's and
GPL customers' digital assets are held;
•Disclose who holds the private key to the custodial wallets where GPL customers'
digital assets are held;
•Disaggregate the amount of GPL's and GPL customers' digital assets held in omnibus
accounts and those held in custodial wallets; and
•Discuss the implications, if any, for GPL customers' digital assets held in omnibus
accounts versus those held in custodial wallets in the event of a bankruptcy or other
claim upon the assets by creditors of yours.  Consider specific risk factor disclosure
as applicable.

 FirstName LastNameMichael Novogratz
 Comapany NameGalaxy Digital Inc.
 May 12, 2023 Page 5
 FirstName LastName
Michael Novogratz
Galaxy Digital Inc.
May 12, 2023
Page 5
Our Opportunity
Asset Prices, Investment Trends, and Adoption Milestones Point to Strong Secular Tailwinds,
page 25
22.Please update the trailing five-year compounded annual growth rate in Bitcoin and
blockchain investment as of the latest most practicable date.
Government Regulation, page 28
23.We note your disclosure at the top of page 29 that "[a] key question that we face in
virtually all of our business lines is whether the digital assets we transact in are 'securities'
under the federal securities laws.  As a general matter, any transaction in securities,
including purchases and sales for principal investment, would be subject to the SEC’s
anti-fraud and anti-manipulation authority under the U.S. Securities Act and the Exchange
Act.  In addition, offers and sales of securities may require registration under the
Securities Act or, alternatively, compliance with various rules and regulations for
exemptions from registration."  Please also note that Galaxy’s involvement in such a
transaction could have additional adverse regulatory consequences, as described on pages
52-53.
24.We note your disclosure in the first full bullet on page 29 that "Galaxy Digital Partners
LLC is registered as a broker-dealer in 53 U.S. states and territories."  Please revise to also
note that Galaxy Digital Partners LLC is registered as a broker-dealer with the
Commission and is a member of FINRA.  This paragraph also provides that "we are
subject to regulation, examination, investigation, and disciplinary action by the SEC,
FINRA, and state securities regulators, as well as other governmental authorities and self-
regulatory organizations with which they are registered or licensed or of which they are a
member" (emphasis added).  Is "they" intended to refer to Galaxy Digital Partners LLC?
Please clarify or revise.
25.We note your disclosure in the second to last bullet on page 29 and on page 232 that
"GDH LP may apply for a New York BitLicense in order to effect aspects of its trading
business."  Please tell us whether this refers to GDH LP or one of its subsidiaries.  Please
also revise to clarify whether any Galaxy entity currently has a BitLicense.
Risk Factors, page 47
26.To the extent material, describe any gaps your board or management have identified with
respect to risk management processes and policies in light of current crypto asset market
conditions as well as any changes they have made to address those gaps.

 FirstName LastNameMichael Novogratz
 Comapany NameGalaxy Digital Inc.
 May 12, 2023 Page 6
 FirstName LastName
Michael Novogratz
Galaxy Digital Inc.
May 12, 2023
Page 6
Risks Related to Our Operations
A determination that a digital asset is a "security", or that an activity in which we engage
involves a "security" transaction..., page 52
27.We note your disclosure in the second bullet that "[a] person that facilitates clearing and
settlement of securities may be subject to registration with the SEC as a clearing agency."
Please revise to add "or that acts as a securities depository" after "facilitates clearing and
settlement of securities."
Our process for analyzing whether or not a particular digital asset is a security for purposes of
the federal securities laws..., page 53
28.We note your response to prior comment 10.  Please expand your risk factor to discuss
who within your company makes the determination as to whether a particular digital asset
that you transact in or develop is a security under the federal securities laws, how that
determination is made, the factors you examine, and what standard(s) is applied in making
the determination.  Additionally, discuss the risks inherent to your particular decision-
making framework and procedures here.  Further, disclose whether all digital assets you
transact in have been re-examined under your current procedures or whether procedures
you implement are prospective only, and discuss related risks as applicable.
DeFi protocols and digital assets used in DeFi protocols pose heightened regulatory concerns...,
page 86
29.Please revise this risk factor to address the possibility that DeFi activities may, in
themselves, implicate federal securities laws.
Risks Related to Regulation, Information Systems and Privacy Matters
The financial services industry is subject to government regulation in the United States..., page
91
30.We note your disclosure regarding your policies related to know-your-customer, anti-
money laundering, and safeguarding of your and your customers' crypto assets.  Please
revise here to describe any material risks to your business and financial condition if your
policies and procedures surrounding the safeguarding of crypto ass