Galaxy Digital Holdings Ltd. GLXY-T, the TSX-listed crypto company that promoted the failed cryptocurrencies luna and terraUSD, paid its new board chair US$35.6-million in his first year of service – one of several lucrative pay packages it handed out during last year’s crypto craze.
Galaxy Digital stole Wall Street’s attention in April, 2021, by announcing the hire of Michael Daffey, who had been a partner at Goldman Sachs and chair of the firm’s global markets division. Mr. Daffey started at Galaxy GLXY-T in September as board chair and a senior adviser, and he is a former colleague of chief executive officer Mike Novogratz, who was also once a partner at Goldman.
Galaxy Digital did not originally disclose Mr. Daffey’s pay package, but in a new securities filing the company said the new board chair was paid US$35.6-million for the final four months of 2021, comprised of 1.5 million Galaxy restricted shares and 500,000 Galaxy stock options that were included in his three-year consulting agreement.
Galaxy Digital also disclosed that it paid chief financial officer Alex Ioffe, who started in April, 2021, US$16.5-million last year, and that it paid chief operating officer Erin Brown, who joined in May, 2021, US$16.8-million. Both pay packages were largely comprised of stock and option awards.
The company also paid co-president Christopher Ferraro, who joined Galaxy in 2018, US$22.5-million, ten times more than he made in 2020. In all, four company leaders made US$91-million between them last year.
The lavish pay packages may not have seemed so outsized when the crypto sector was soaring last year, but they are now at odds with Galaxy’s recent market performance. Galaxy is one of the few publicly listed crypto companies and its stock has plummeted 81 per cent from its record high set in November, 2021.
Some of Galaxy’s stock market woes stem from a broad selloff across the crypto sector, with the total value of crypto assets globally plummeting to US$1.4-trillion from US$3.2-trilion in the past six months, according to the FT Wilshire Digital Asset Index. But Galaxy was also a major backer of the cryptocurrencies luna and terraUSD, and the prices of both collapsed in a matter of weeks this spring, wiping out US$40-billion.
Now that Galaxy’s shares are in freefall, the value of each executive’s pay package is also tumbling, because most of the compensation was paid in shares and stock options. But even at Tuesday’s closing price, Mr. Daffey’s share grant alone is still worth $12.2-million.
Many crypto investors, meanwhile, are reeling from the luna and terraUSD crashes. After both cryptocurrencies collapsed in early May, Mr. Novogratz issued a mea culpa apologizing for his previous promotion of both.
“Reading the stories of retail investors who lost their savings in one investment is heart-wrenching,” Mr. Novogratz wrote in a public letter.
For his part, Mr. Novogratz was not paid a salary, bonus or share awards last year, earning only a token US$4,625 in health insurance premiums.
However, much of his wealth is tied up in the company, and he currently owns 522,945 Galaxy common shares and just over 205 million limited partnership units that can be exchanged, one-for-one, for Galaxy common shares.
At the company’s record high of $43.98 in November, this stake was worth more than $9-billion. At Tuesday’s close of $8.13, it was worth about $1.6-billion.
Mr. Novogratz’s stake decreased by roughly 8.6 million limited partnership units on Dec. 30, 2021, when he contributed shares worth $202-million to a “donor advised fund,” according to a company statement.
Galaxy declined to comment for this story, but the company explained its compensation philosophy in a securities filing. Galaxy said it “is still in its early years and more like a ‘startup,’ nonetheless the company is a complex, regulated institution which requires hiring experienced senior talent from highly competitive financial services and technology industries.”
The company’s equity plan, it says, “is necessary to attract the best talent from Silicon Valley tech companies and financial services firms. Compensation at both these sources of talent trends high.”
When explaining the pay decisions for specific executives, the company cited Mr. Daffey’s 25 years of experience in the financial services sector, Mr. Ioffe’s 30 years of senior-level finance experience, and the compensation that Ms. Brown was forgoing at her former employer, as well as her experience in treasury, risk and trading operations.
The story has been updated to reflect the reason for Mr. Novogratz’s share disposition at the end of 2021
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Tim Kiladze
David Milstead