CoinSmart has accepted that its Coinsquare acquisition deal is not going to happen anymore, but the Canadian crypto trading platform is not happy about it and plans to seek recompense.
CoinSmart announced on February 2 that it has accepted that Coinsquare is pulling out of its previously agreed-upon deal to buy Canadian crypto competitor CoinSmart. The Neo Exchange-listed company acknowledged that the transaction will no longer proceed.
âCoinSmart intends to commence legal proceedings against Coinsquare to seek monetary damages arising from Coinsquareâs breaches of the Share Purchase Agreement.â
While CoinSmart has accepted that the deal will no longer proceed, the startup reiterated its position that Coinsquare âhad no legal basisâ to terminate the transaction. CoinSmart said it plans to pursue the matter further in court.
âCoinSmart intends to commence legal proceedings against Coinsquare to seek monetary damages arising from Coinsquareâs breaches of the Share Purchase Agreement,â the company stated in the press release. It is currently unclear how much CoinSmart plans to seek in damages. When reached by BetaKit, CoinSmart declined to provide any further comment.
In response to CoinSmartâs latest announcement, a Coinsquare spokesperson told BetaKit, âOur position has not changed. As we have stated before, Coinsquare exercised its rights to terminate the agreement with CoinSmart in accordance with its terms.â
Coinsquare first struck a deal to purchase Canadian crypto trading competitor CoinSmart in September 2022 for about $29 million in cash and shares plus performance-based incentives. But in January 2023, Coinsquare backed out of this agreement.
As to why, Coinsquare cited the high costs and risks of acquiring a public company while remaining a private firm, as previously reported by The Globe and Mail. CoinSmart co-founder and CEO Justin Hartzman confirmed to BetaKit that those were the reasons Coinsquare gave his company.
RELATED: Coinsquare moves to terminate CoinSmart acquisition deal
âThere was a specific clause, truth be told, in the [share purchase agreement], for termination for a specific reason around reporting, of which they cited and used,â Hartzman told BetaKit in a January interview. âWe just don’t agree with that, nor [from] a legal standpoint, [think] that is valid by any means whatsoever.â
CoinSmart initially rejected Coinsquareâs notice of termination on this basis. In that same January interview, Hartzman said he was disappointed by Coinsquareâs decision, but expressed a desire to âmend fencesâ with Coinsquare, and hope that the company would come around and close the previously agreed upon acquisition deal.
At the same time, Hartzman hinted that legal action was a possible outcome should Coinsquare not return to the table.
âAs a publicly-traded company with a responsibility to my shareholders and to my partners and to my team, we’ll look at every option available to us,â the CEO told BetaKit. âNo one wishes to have legal battles, no one wishes to have anything of the sort, but we do have to stand up for whatâs right, and Iâll always protect my shareholdersâ best interest.â
RELATED: CoinSmart rejects Coinsquareâs notice to terminate acquisition deal
Now, after Coinsquare has failed to close the deal, CoinSmart is taking this course of action.
Shortly after Coinsquare pulled out of its agreement to buy CoinSmart, BNN Bloomberg reported that Coinsquare was âengaged in advanced merger talksâ with WonderFi, which owns Bitbuy and Coinberry. Both Coinsquare and WonderFi declined to comment on this report to BetaKit, which WonderFi also neither confirmed nor denied in a public statement.
Hartzman told BetaKit that when Coinsquare moved to terminate the CoinSmart deal, the former did not mention whether it was in merger and acquisition talks with WonderFi or other companies.
CoinSmart and Coinsquare are a pair of Toronto-based competitors that allow Canadian customers to buy, sell, and trade cryptocurrencies, like Bitcoin and Ethereum. They also represent two of Canadaâs 11 regulated crypto exchanges. In late 2021, CoinSmart registered with the Ontario Securities Commission, and last October, Coinsquare became the first crypto platform member of the Investment Industry Regulatory Organization of Canada.
Feature image courtesy CoinSmart.