Sunday , 18 February 2018

Mike Novogratz plans to launch Cryptocurrency Merchant Bank

Mike Novogratz, a former chief investment officer for Fortress, is behind Galaxy Digital, which according to a Jan. 9 announcements will constitute a “full service, digital assets merchant bank.” Described by some as a kind of “Goldman Sachs for crypto,” Bloomberg reports that the plan is to get the company listed on the TSX Venture Exchange and raise upwards of $200 million. The bank will be active in four areas: trading, principal investing, asset management and advisory work.

The move comes less than a month after Novogratz shelved plans to start a crypto hedge fund. According to a person familiar with his efforts, Novogratz also had been laying the groundwork for Galaxy for months. The fund, had he continued with it, would have sat inside Galaxy’s asset-management unit.

A merchant bank is among the most ambitious concepts to emerge from the speculative frenzy that has characterized the cryptocurrency market. While Novogratz last year described the runup in bitcoin, ether, ripple and other so-called tokens as the “biggest bubble of our lifetimes,” he also has said he believes blockchain — the computer code that underpins all cryptocurrencies — will reshape finance just as the internet did communication.

Roadmap released

Galaxy will first buy First Coin Capital Corp., a Canadian startup, then merge with Bradmer Pharmaceuticals Inc., a Canadian shell company, through a reverse takeover and use it to raise C$250 million ($201 million) in a private placement next month.

Bradmer will be renamed Galaxy Digital Holdings, own an interest in the merchant bank, and list on the TSX exchange.

Galaxy hopes to complete the transactions by the end of the first quarter, when shares will begin trading. There is no formal filing of financial statements with securities regulators as there is for an initial public offering.

A financial veteran

Novogratz, 53 spent more than a decade at Goldman Sachs Group. He eventually became a principal at Fortress Investment Group LLC and managed the Fortress Macro Fund until it liquidated in 2015.

Novogratz envisions Galaxy as the Goldman Sachs of crypto, according to one unnamed source. The source said Novogratz is putting most of his crypto investments into Galaxy — about $400 million of bitcoin, Ether, initial coin offerings and stakes in startups including Xapo, Bitstamp and Ripple Labs.

Novogratz decided against his crypto hedge fund since he was concerned about buying bitcoin or Ether for clients while at the same time selling crypto investments in his personal account. By exchanging those same investments for equity in the merchant bank, he avoids the conflict.

Galaxy noted its purchase of First Coin and the reverse takeover of Bradmer are subject to shareholder approval.

Novogratz will be chairman and chief executive officer of the company. The Galaxy management team will include Richard Tavoso, former head of global arbitrage at RBC Capital Markets; Christopher Ferraro, formerly with HPS Investment Partners and BlackRock Kelso Capital Advisors; and David Namdar, formerly with Millennium Partners and UBS AG.

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