Galaxy Digital Holdings Ltd. (TSX: GLXY) (“Galaxy Digital”, “GDH Ltd.”, or the “Company”) today released both Galaxy Digital Holdings LP’s (“GDH LP” or the “Partnership”) and GDH Ltd.’s financial results for the three and six months ended June 30, 2020 (“Q2 2020” or the “second quarter”), as well as corporate updates through the date of this press release.

“Galaxy Digital’s second quarter and year-to-date results reflect a dynamic cryptocurrency and blockchain technology sector with multiple positive tailwinds, as well as our businesses’ cumulative investments in market relationships, differentiated solutions and infrastructure,” said Mike Novogratz, Founder and CEO of Galaxy Digital. “Whether it’s newly announced partnerships, consistent inflows into Asset Management, strong volumes in Trading, new mandates in Investment Banking or new and follow-on venture investments, Galaxy Digital is moving quickly to take advantage of the broad digital asset opportunity set.”

Corporate Updates

  • On July 6, 2020, the Company started trading on the Toronto Stock Exchange (“TSX”), after graduating from the TSX Venture Exchange.
  • The Company completed its share repurchase program in April 2020. As part of the share repurchase program, the Company purchased approximately 4.9 million shares for a total cost of C$5.5 million.
  • Galaxy Digital expects to transition the leadership of its Investment Banking business in the fourth quarter of 2020 when Ian Taylor, current Head of Investment Banking, intends to depart. The Company has commenced an executive search process.

Business Highlights

  • During the second quarter of 2020, the Principal Investments team closed two new and four follow-on investments, representing $5.7 million of invested capital.
    • Investments made during the second quarter bring capital deployed for the six months ended June 30, 2020 to $19.9 million represented by 2 new investments and 9 follow-on investments.
    • Investments made (including loans purchased) from January 9, 2018 through June 30, 2020 total $201.5 million and are represented by 37 new and 39 follow-on investments.
  • As previously disclosed, as of June 30, 2020, Galaxy Digital Capital Management (“GDCM” or “GDAM”) had assets under management (“AUM”) of $375.3 million (consisting of: Galaxy Benchmark Crypto Index Fund LP (the “Index Fund”) – $10.5 million (as calculated per the terms of the fund’s partnership agreement); Galaxy Bitcoin Fund, LP, Galaxy Institutional Bitcoin Fund, LP, and Galaxy Institutional Bitcoin Fund, Ltd. (collectively the “Bitcoin Funds”) – $39.8 million, and Galaxy EOS VC Fund LP (the “EOS Fund”) committed capital – $325.0 million.
    • During the second quarter of 2020 GDAM continued to focus on the recently launched Galaxy Bitcoin Fund and Galaxy Institutional Bitcoin Fund (collectively, the “Bitcoin Funds”). The Bitcoin Funds offer institutional and accredited investors institutionally wrapped bitcoin exposure supported by vetted service providers, including Bakkt, a digital assets platform founded by the Intercontinental Exchange (ICE), and Fidelity Digital Assets as custodians for the funds, Bloomberg L.P. as pricing agent, Deloitte & Touche LLP for audit, and Ernst & Young LLP for tax. The Bitcoin Funds track the Bloomberg CFIX pricing of bitcoin (“XBT”). XBT is managed by Bloomberg and uses a sophisticated pricing algorithm to produce accurate indications of bid and ask quotes derived from Bloomberg approved cryptocurrency pricing sources. The Bitcoin Funds are a complementary product offered alongside the existing Index Fund. The XBT returned 40.81% in the second quarter of 2020 and has returned 61.89% on a year to date basis through August 12, 2020.
    • The Index Fund is a passively managed index fund which tracks the Bloomberg Galaxy Crypto Index (the “BGCI”), an index co-branded with and administered by Bloomberg which is designed to track the performance of the largest, most liquid portion of the digital asset market. The BGCI has returned 31.07% in the second quarter of 2020 and has returned 90.23% on a year to date basis through August 12, 2020.
    • In June, GDAM announced a strategic partnership with CAIS, the industry-leading alternative investment platform, to provide financial advisors with streamlined access to Galaxy Digital’s investment products, plus educational resources spanning blockchain and digital assets. The CAIS platform offers financial advisors access to a complete end-to-end solution, including a broad selection of alternative investment funds and products, independent due diligence from Mercer, tools and analytics, a streamlined investment process, and integration with custodians for greater reporting accuracy.
    • Additionally, during the second quarter of 2020, the Galaxy Interactive team who manages the Galaxy EOS VC Fund (the “EOS Fund”) made investments in StockX, OS Gaming, Playable Worlds, AviaGames, Hour One, and add-on investments in Cipher Trace, Tempo Storm, and Clause.
  • The Partnership’s trading business, Galaxy Digital Trading (“GDT”), generated over $1 billion of volume through its OTC trading desk in the second quarter.  GDT experienced an increase in actively trading counterparties and trading volumes in the second quarter of 2020 relative to the first quarter of 2020 despite seeing some near-historical low volatility in the space.  The increase in trading volumes can be attributed to GDT’s management of its counterparty base which has evolved in both size and sophistication, the recovery in prices from March 2020 lows, and the continued roll out of our electronic trading platform. The momentum witnessed in the trading business has continued into the third quarter of 2020 as Bitcoin and Ether have moved substantially higher and GDT’s counterparty base has remained engaged. During the same period GDT’s continued enhancements to its product suite have generated ongoing demand across its lending, derivatives, and trading solutions. These solutions facilitate counterparty retention and are advantageously positioned in the market to remain a competitive business in our market.
    • In June, Galaxy Digital Trading and Bakkt®, the digital asset derivatives trading and custody platform majority-owned by Intercontinental Exchange (ICE), announced a partnership to launch a collaborative white-glove service for asset managers looking to acquire, build positions in and store bitcoin.  GDT is providing market access and trading capabilities, while the Bakkt Warehouse, a qualified custodian of bitcoin regulated by the New York State Department of Financial Services, is safeguarding digital assets for clients.
  • In the second quarter, the Partnership began referring to the advisory services business as the investment banking business. With regards to the investment banking business, during the second quarter of 2020, the Partnership acted as strategic adviser to a confidential client in the mining sector. In addition, the Partnership commenced a financing assignment in the mining space.
    • During the first half of 2020,  Investment Banking continued to make meaningful progress towards its strategic goal of becoming the leading corporate finance and strategic advisory firm in the blockchain technology and digital assets sectors.
    • Investment Banking generated new mandates for clients across financing, mergers and acquisitions, and other strategic matters, with several active mandates currently in various stages of execution.
    • Galaxy Digital Advisors LLC changed its name to Galaxy Digital Partners LLC.

Select GDH LP’s Financial Highlights (Q2 2020)

  • As of June 30, 2020, digital assets, including digital assets posted as collateral, stood at $170.8 million, an increase of $76.6 million from December 31, 2019. This increase was primarily due to the increase in the fair value of the digital assets during the period, as the prices of digital assets held by the Partnership increased, as well as an increase in the holdings of certain digital assets.
  • As of June 30, 2020, the Partnership had a material holding in bitcoin of $133.9 million (December 31, 2019 – $81.3 million). In addition, as of August 13, 2020, there was no material change in the Partnership’s exposure to bitcoin.
  • Investments stood at $177.8 million as of June 30, 2020, an increase of $19.6 million from December 31, 2019. The change was primarily due to $19.9 million of new capital deployed by the Principal Investments team during the period.
  • Total equity increased by $19.8 million during the year to $374.9 million as of June 30, 2020 primarily due to $10.8 million of net comprehensive income.
  • As of June 30, 2020, the Partnership’s net book value1 per unit was approximately C$1.82 (US$1.33), compared to C$1.62 (US$1.24) as of December 31, 2019.
  • For the three months ended June 30, 2020, net comprehensive income was $38.5 million, as compared to net comprehensive income of $113.8 million for the three months ended June 30, 2019. The current quarter gain was largely a result of realized gain on digital assets, i.e. cryptocurrencies which trade continuously in the market. The net comprehensive income for the three months ended June 30, 2019 was primarily a result of realized gain on digital assets and unrealized gain on investments. For the six months ended June 30, 2020, net comprehensive income was $10.8 million, as compared to net comprehensive income of $126.6 million for the six months ended June 30, 2019. The current year to date income was largely a result of realized and unrealized gains on digital assets, partially offset by the year to date operating expenses. The net comprehensive income for the six months ended June 30, 2019 was largely a result of realized and unrealized gains on digital assets, partially offset by the year to date operating expenses.

1 Net book value includes non-controlling interests.

GDH LP’s Financial Results

June 30,

December 31,

2020

2019

Assets

Current assets

Cash

$

40,393,773

$

106,262,780

Digital assets

162,514,265

85,980,731

Investments

177,825,315

158,163,420

Receivable for digital asset trades

3,368,224

330,609

Digital asset loans receivable

22,307,904

16,061,945

Assets posted as collateral

12,298,708

10,585,819

Receivables

1,335,982

1,853,169

Derivatives

4,220,924

—

Prepaid expenses and other assets

2,409,119

2,580,255

Loans receivable

356,094

11,719,738

427,030,308

393,538,466

Right of use asset

4,878,111

5,182,993

Property and equipment

3,809,242

4,057,662

8,687,353

9,240,655

Total assets

$

435,717,661

$

402,779,121

Liabilities

Current liabilities

Digital assets sold short

$

7,878,037

$

18,616,860

Accounts payable and accrued liabilities

11,228,329

11,719,494

Payable for digital asset trades

1,219,156

250,158

Digital asset loans payable

34,173,574

11,134,329

Collateral payable

901,097

434,498

Lease liability

776,699

772,003

56,176,892

42,927,342

Lease liability

4,644,183

4,747,214

Total liabilities

60,821,075

47,674,556

Equity

Partners’ capital

356,642,619

347,785,081

Non-controlling interests

18,253,967

7,319,484

Total equity

374,896,586

355,104,565

Total liabilities and equity

$

435,717,661

$

402,779,121

Three months
ended
June 30, 2020

Three months
ended
June 30, 2019

Six months
ended
June 30, 2020

Six months
ended
June 30, 2019

Income (loss)

Advisory and management fees

$

1,471,229

$

1,329,700

$

3,057,842

$

2,850,211

Net realized gain on digital assets

48,517,074

98,099,376

10,365,143

115,570,500

Net realized gain (loss) on investments

(4,580,629)

38,100,635

(4,417,858)

38,100,635

Interest income

1,269,805

920,159

2,708,932

1,625,922

Net derivative gain

2,438,246

5,090,313

6,873,313

5,699,309

49,115,725

143,540,183

18,587,372

163,846,577

Operating expenses

Equity based compensation

3,290,561

6,822,269

4,911,971

17,143,772

Compensation and compensation related

5,809,771

7,725,305

12,994,165

14,679,470

General and administrative

2,721,765

1,887,780

6,320,354

4,409,070

Professional fees

1,269,676

1,011,301

2,503,201

3,616,627

Interest

1,260,154

938,928

2,271,641

1,627,254

Insurance

382,131

330,254

664,261

757,104

Director fees

50,000

50,000

100,000

100,000

(14,784,058)

(18,765,837)

(29,765,593)

(42,333,297)

Net unrealized gain (loss) on digital assets

(2,203,038)

11,613,204

10,721,287

10,948,674

Net unrealized gain (loss) on investments

6,957,658

(22,724,996)

11,631,898

(5,822,225)

Unrealized foreign currency gain (loss)

(392,164)

189,526

(565,682)

280,598

Realized foreign currency gain (loss)

(190,036)

(89,226)

141,540

(199,738)

4,172,420

(11,011,492)

21,929,043

5,207,309

Income for the period

$

38,504,087

$

113,762,854

$

10,750,822

$

126,720,589

Income attributed to:

Unit holders of the Partnership

35,296,330

107,964,998

8,355,601

120,535,626

Non-controlling interests

3,207,757

5,797,856

2,395,221

6,184,963

$

38,504,087

$

113,762,854

$

10,750,822

$

126,720,589

Other comprehensive income (loss)

Foreign currency translation adjustment

—

4,666

16,793

(88,268)

Net income and comprehensive income for the period

$

38,504,087

$

113,767,520

$

10,767,615

$

126,632,321

Net income and comprehensive income attributed to:

Unit holders of the Partnership

$

35,296,330

$

107,969,664

$

8,372,394

$

120,447,358

Non-controlling interests

3,207,757

5,797,856

2,395,221

6,184,963

$

38,504,087

$

113,767,520

$

10,767,615

$

126,632,321

Income and expenses by each reportable segment of GDH LP for the three months ended June 30, 2020 are as follows:

Trading

Principal Investments

Asset Management

Investment Banking

Corporate
 and Other

Totals

Income (loss)

Advisory and management fees

$

—

$

—

$

1,246,229

$

225,000

$

—

$

1,471,229

Net realized gain (loss) on digital assets

48,710,411

(193,337)

—

—

—

48,517,074

Net realized loss on investments

—

(4,580,629)

—

—

—

(4,580,629)

Interest Income

1,142,879

122,489

4,394

—

43

1,269,805

Net derivative gain

2,438,246

—

—

—

—

2,438,246

52,291,536

(4,651,477)

1,250,623

225,000

43

49,115,725

Operating expenses

4,810,233

788,796

3,002,789

769,610

5,412,630

14,784,058

Net unrealized gain (loss) on digital assets

(14,564,670)

12,361,632

—

—

—

(2,203,038)

Net unrealized gain on investments

—

6,957,658

—

—

—

6,957,658

Unrealized foreign currency loss

(392,164)

—

—

—

—

(392,164)

Realized foreign currency loss

(190,036)

—

—

—

—

(190,036)

(15,146,870)

19,319,290

—

—

—

4,172,420

Net income (loss)

$

32,334,433

$

13,879,017

$

(1,752,166)

$

(544,610)

$

(5,412,587)

$

38,504,087

Income and expenses by each reportable segment of GDH LP for the three months ended June 30, 2019 are as follows:

Trading

Principal Investments

Asset Management

Investment Banking

Corporate
 and Other

Totals

Income (loss)

Advisory and management fees

$

—

$

—

$

1,329,700

$

—

$

—

$

1,329,700

Net realized gain (loss) on digital assets

98,711,252

(611,876)

—

—

—

98,099,376

Net realized gain on investments

—

38,100,635

—

—

—

38,100,635

Interest Income

244,242

659,445

—

16,256

216

920,159

Net derivative gain (loss)

5,094,063

30,000

(33,750)

—

—

5,090,313

104,049,557

38,178,204

1,295,950

16,256

216

143,540,183

Operating expenses

5,298,802

1,556,254

3,928,206

2,381,366

5,601,209

18,765,837

Net unrealized gain on digital assets

1,822,201

9,791,003

—

—

—

11,613,204

Net unrealized loss on investments

—

(22,724,996)

—

—

—

(22,724,996)

Unrealized foreign currency gain (loss)

197,208

—

—

(7,639)

(43)

189,526

Realized foreign currency loss

(89,226)

—

—

—

—

(89,226)

1,930,183

(12,933,993)

—

(7,639)

(43)

(11,011,492)

Net income (loss)

$

100,680,938

$

23,687,957

$

(2,632,256)

$

(2,372,749)

$

(5,601,036)

$

113,762,854

Assets and liabilities by reportable segment of GDH LP as of June 30, 2020 are as follows:

Trading

 Principal Investments

Asset Management

Investment Banking

Corporate and Other

Totals

Total assets

$

187,389,894

$

226,020,465

$

2,225,371

$

1,642,242

$

18,439,689

$

435,717,661

Total liabilities

$

48,624,806

$

261,433

$

741,823

$

53,409

$

11,139,604

$

60,821,075

Assets and liabilities by reportable segment of GDH LP as of December 31, 2019 are as follows:

Trading

 Principal Investments

Asset Management

Investment Banking

Corporate and Other

Totals

Total assets

$

177,226,904

$

199,678,202

$

1,415,135

$

1,102,055

$

23,356,825

$

402,779,121

Total liabilities

$

30,329,154

$

403,187

$

1,377,492

$

96,273

$

15,468,450

$

47,674,556

Select statement of financial position information

The fair value of each asset class by reporting segment of GDH LP as of June 30, 2020 is as follows:

Trading

Principal Investments

Asset Management

Investment Banking

Corporate and Other

Totals

Digital assets:

Cryptocurrency

$

112,538,220

$

49,976,045

$

—

$

—

$

—

$

162,514,265

Digital assets posted as collateral

8,298,708

—

—

—

—

8,298,708

Investments:

Pre-ICO

—

5,757,329

—

—

—

5,757,329

Convertible Notes

—

7,262,076

—

—

—

7,262,076

Preferred Stock

—

81,531,470

—

—

—

81,531,470

Common Stock

—

28,631,022

—

—

—

28,631,022

LP/LLC Interests

—

52,517,740

—

—

—

52,517,740

Warrants/Trust Units/Trust Shares

1,488,441

637,237

—

—

—

2,125,678

$

122,325,369

$

226,312,919

$

—

$

—

$

—

$

348,638,288

The fair value of each asset class by reporting segment of GDH LP as of December 31, 2019 is as follows:

Trading

Principal Investments

Asset Management

Investment Banking

Corporate and Other

Totals

Digital assets:

Cryptocurrency

$

53,882,704

$

32,098,027

$

—

$

—

$

—

$

85,980,731

Digital assets posted as collateral

8,208,653

—

—

—

—

8,208,653

Investments:

Pre-ICO

—

6,005,114

—

—

—

6,005,114

Convertible Notes

—

5,255,579

—

—

—

5,255,579

Preferred Stock

—

75,703,153

—

—

—

75,703,153

Common Stock

—

32,476,631

—

—

—

32,476,631

LP/LLC Interests

—

38,120,805

—

—

—

38,120,805

Warrants/Trust Units

—

602,138

—

—

—

602,138

$

62,091,357

$

190,261,447

$

—

$

—

$

—

$

252,352,804

This press release should be read in conjunction with (i) GDH LP’s Management Discussion and Analysis and Consolidated Financial Statements for the three and six months ended June 30, 2020 and (ii) GDH Ltd.’s Management Discussion and Analysis and Consolidated Financial Statements for the three and six months ended June 30, 2020 (together, the “Consolidated Financial Statements” and “MD&As”), which have been filed on SEDAR at www.sedar.com.