- Prime Trust is the latest crypto custody provider to fall.
- The company has confirmed its insolvency.
- A petition is underway to liquidate assets.
Prime Trust, a Las Vegas-based crypto custodian, filed for Chapter 11 proceedings in the U.S. after rumors regarding the company’s insolvency emerged when its subsidiary, Banq, also filed for bankruptcy on June 13 for alleged mismanagement.
Two weeks following Banq’s filing, Nevada regulators placed Prime Trust under receivership after deeming it insolvent and unable to serve customers. The authorities also sought a court order to freeze the company’s business activities.
A Struggling Business
Prime Trust has faced a series of challenges from two years ago. When Nevada regulators moved to place the company under receivership, court documents revealed that it had misappropriated customer funds and used them to settle withdrawals since December 2021.
The regulators also reported that Prime Trust owed customers over $82 million against the $68 million in digital assets under its custody during that time.
In the bankruptcy filing, the company has indicated having between 25,000 to 50,000 creditors, with total estimated liabilities of up to $500 million, as opposed to its $100 million worth of business assets.
“The Company intends to file a number of motions with the Bankruptcy Court designed to facilitate the Company’s orderly evaluation of all strategic alternatives, including potentially a sale of the Company’s assets and operations,” said Prime Trust in a press release.
A Failed Buyout
Earlier in June, Prime Trust made headlines when rival crypto custodian BitGo offered to acquire it but chickened out of the deal two weeks later without stating the reason publicly. “After considerable effort and work to find a path forward with Prime Trust, BitGo has made the hard decision to terminate its acquisition of Prime Trust,” said the company on Twitter.
Learn what happens when a crypto exchange files for bankruptcy:
Read how Prime Trust’s receivership case correlated with the recent TUSD depeg: