Las Vegas-based crypto custodian Prime Trust files for bankruptcy

• In June, the Nevada regulator announced its plan to take over the firm, alleging Prime Trust was nearly insolvent.
• The firm will continue to function as “debtors-in-possession” under the jurisdiction of the bankruptcy court.

On 15 August, Las Vegas-based crypto custodian Prime Trust filed for Chapter 11 bankruptcy protection in Delaware after witnessing a shortage in customer funds.

The filing listed Prime Core Technologies Inc., Prime Trust, LLC, Prime IRA LLC and Prime Digital LLC as the entities requesting Chapter 11 relief.

The filing mentioned that the firm estimated 25,000-50,000 creditors. Its five largest claims amounted to a total of $105 million. The single largest unsecured creditor had a claim of $55 million; the second largest creditor was owed a total of $31.7 million.

Prime Trust said that its liabilities ranged from $100 million to $500 million. Meanwhile, its assets ranged from $50 million to $100 million.

An obvious consequence for the firm following financial troubles

In June, the Nevada regulator announced that it plans to take over the firm and freeze all of its businesses. It alleged that Prime Trust was nearly insolvent.

The same month, a rival crypto custodian BitGo also declared its intent to acquire the company, but backed out only two weeks later. BitGo did not provide any explanation for ending the deal.

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. This decision was not made lightly and BitGo remains committed to our mission to deliver trust in digital assets.

— BitGo (@BitGo) June 22, 2023

Then, the Judicial District Court of Nevada ordered Prime Trust to be put into receivership last month.

The Eighth Judicial District Court of Nevada has ordered Prime Trust LLC into temporary receivership pending an August order to show cause hearing. NFID has modified its Order to Cease and Desist. Read both here: https://t.co/buQKb9PNWe pic.twitter.com/nXBn0xB5jH

— Nevada Department of Business & Industry (@NevadaDBI) July 18, 2023

The order followed the state asking the company to cease all of its operations amid a shortage in customer funds. It was also accused of utilizing customer funds to meet withdrawal requests since December 2021. John Guedry, former president of Bank of Nevada, would take over the company’s operations, the filing stated.

Currently, Prime Trust owed over $85 million in fiat to its clients but only had about $2.9 million. Prime Trust’s digital asset liabilities were of lower amount, with the company owing $69.5 million in crypto assets while holding approximately $68.6 million.

Prime Trust will continue to function as “debtors-in-possession” under the jurisdiction of the bankruptcy court.