- Troubled crypto custodian Prime Trust has filed for bankruptcy protection
- The company has an $83 million shortfall following the loss of customer bitcoin in 2021
- Prime Trust plans to explore potential solutions, including asset sales, while still honoring staff pay and benefits
Troubled crypto custodian Prime Trust has filed for bankruptcy protection following the revelations of a significant deficit in customer funds in June. According to court documents, the firm has disclosed that its extensive network of clientele has left it with a complex situation, estimating its creditors to range from 25,000 to 50,000. The move towards bankruptcy was triggered by a petition from Nevada regulators, who urged for the company to be placed under receivership. The plea, submitted in June, pointed out a severe shortfall of approximately $83 million, marking a critical blow to Prime Trust’s stability.
Snowball Started Rolling in 2021
Prime Trust was on the verge of being bought out by BitGo earlier this year when the Financial Institutions Division of the Nevada Department of Business and Industry issued it with a cease and desist order. It was soon revealed that Prime Trust lost access to some of its crypto wallets containing customer bitcoin in 2021 and attempted to buy them back with incoming funds.
The debts were estimated at $85 million in fiat and a further $69.5 million in crypto at the time, with the bankruptcy filing clarifying that assets held by Prime Trust fall within the range of $50 million to $100 million, while liabilities stand between $100 million and $500 million.
Prime Trust Finances are at “Critically Deficient Level”
The order added that due to the “critically deficient level” of its finances, which includes a negative $12 million stockholders’ equity position, the company is “now in [the] position where it is in an unsafe or unsound condition to transact business and/or if it were to continue to operate it would be in an unviable and/or unsafe manner.”
In light of these dire circumstances, Prime Trust has expressed its intention to explore multiple avenues for resolution. This includes the potential sale of its operational assets, as well as evaluating various strategic options. The company confirmed that it will honor wage payments and benefits for its remaining workforce during the bankruptcy period.