Galaxy Digital (GLXY), the crypto-focused financial-services firm run by Michael Novogratz, said on Wednesday that it has exposure of around $76.8 million of cash and digital assets tied to troubled crypto exchange FTX.
In a statement, the firm also reported a third-quarter net loss of $68.1 million, compared with a $517.9 million profit in the same period last year, and said Damien Vanderwilt will step down as co-president in January.
The near-collapse of FTX, which on Tuesday agreed to sell itself to rival Binance following days of speculation that sister company Alameda Research faced a liquidity crisis, has “put a short term wrench” in the crypto industry, Novogratz said on Galaxy's earnings conference call. The firm is withdrawing $47.5 million of its exposure to the exchange.
While it's important to be “nimble and agile” in coming weeks, the industry has been able to digest multiple events and other scandals and remains resilient, Novogratz said. Crypto will eventually become correlated with the macroeconomy again and not be so event-driven, he said.
“In the short run, people are nervous,” he said, noting that Galaxy remains in a good position to navigate the current environment. Novogratz also called Galaxy’s stock, which fell as much as 22% to C$3.63 on Wednesday, “unbelievably cheap.”
Separately, co-President Chris Ferraro said Galaxy has no exposure to Alameda and no exposure to FTX's exchange token FTT as collateral for its lending business. The company's only direct exposure is through its FTX balances, which is “down dramatically” from a higher level.
Last week, CoinDesk reported that Galaxy Digital was planning to cut at least 20% of its global workforce, according to sources. Novogratz said on Wednesday's call that Galaxy elected to cut about 14%-15% of its headcount, citing costs. The job cuts were tough, but necessary, he added. Novogratz also said Galaxy is boosting its investment across the engineering, security, and legal divisions of the business.
UPDATE (Nov. 9, 16:48 UTC): Adds comments from earnings call, shares.
UPDATE (Nov. 9, 19:45 UTC): Updates commentary on job cuts from conference call.
The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups. As part of their compensation, certain CoinDesk employees, including editorial employees, may receive exposure to DCG equity in the form of stock appreciation rights, which vest over a multi-year period. CoinDesk journalists are not allowed to purchase stock outright in DCG.
Learn more about Consensus 2023, CoinDesk’s longest-running and most influential event that brings together all sides of crypto, blockchain and Web3. Head to consensus.coindesk.com to register and buy your pass now.