Mike Novogratz's crypto-focused financial services firm Galaxy Digital has closed its acquisition of institutional self-custody platform GK8 more than two months after winning an auction to buy the company from bankrupt crypto lender Celsius Network.
GK8 solutions will continue to be available to the market, but Galaxy will also integrate the technology into its forthcoming prime brokerage platform, GalaxyOne.
Celsius filed for bankruptcy protection in July after crypto winter set in and put several assets up for sale – including GK8, which the lender had acquired for $115 million in November 2021.
The bankruptcy and continuing bear market pressure on valuations allowed Galaxy to pick up GK8 for approximately $44 million, a more than 60% discount. Galaxy had previously backed out of a $1.2 billion deal with crypto custodian BitGo, which led to a lawsuit.
The purchase will help build out GalaxyOne, the previously launched platform that will offer a wide range of financial services for institutions, including trading, lending, derivatives, cross-portfolio margining, and a number of custodial options, including GK8. Galaxy also gains an office in Tel Aviv and a nearly 40-person team, including the founders, who have joined Galaxy to lead its custodial technology offering.
“Investor demand for innovative and secure custody services continues to grow, and the acquisition of GK8 enhances our efforts to offer clients best-in-class cold storage solutions along with cutting-edge wallet technology,” said Galaxy Digital founder and CEO Michael Novogratz in a press release provided to CoinDesk. “In addition to continuing to offer highly valuable custody technology to clients, the GK8 team will play a pivotal role in our evolution to offer a full-service financial platform for digital assets.”
Self-custody for institutions
Founded in 2018, GK8 solutions are tailored toward traditional finance and crypto-native institutions such as banks, hedge funds and brokerage client eToro. The infrastructure lets clients enable staking, decentralized finance (DeFi) networks, non-fungible token (NFT) support, trading services and more.
GK8 offers its services through a multiparty computation (MPC) vault, an automated digital asset storage method that splits the private key needed to access the assets between an unlimited number of co-signers, and a cold vault, a slower but more secure method where transactions are processed manually.
While cold wallets keep assets safe by not connecting to the internet where private keys are vulnerable to hackers, most products on the market do need to go online at some point to get blockchain-validated data to verify the transaction. GK8 has developed patented cryptographic techniques that allow its cold vault to create, sign and send transactions to the blockchain without an internet connection, CEO Lior Lamesh explained to CoinDesk in an interview.
“Since we never receive input, it means we are not exposed to any cybersecurity attack vector. It’s not that we mitigate the risk here – we remove it,” said Lamesh.
Lamesh and GK8 co-founder and Chief Technology Officer Shahar Shamai previously worked together in the office of Israel’s prime minister to protect the country’s strategic assets from cyber attacks. GK8 was launched in 2018, and the company was acquired by Celsius three years later. GK8 was able to remain relatively unscathed during the bankruptcy because it was operating as an independent company, said Lamesh.
The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is an award-winning media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. In November 2023, CoinDesk was acquired by Bullish group, owner of Bullish, a regulated, institutional digital assets exchange. Bullish group is majority owned by Block.one; both groups have interests in a variety of blockchain and digital asset businesses and significant holdings of digital assets, including bitcoin. CoinDesk operates as an independent subsidiary, and an editorial committee, chaired by a former editor-in-chief of The Wall Street Journal, is being formed to support journalistic integrity.