Prime Trust Subsidiary Banq Files for Chapter 11 Bankruptcy

• Prime Trust subsidiary Banq filed for bankruptcy in the U.S., revealing assets of $17.72 million and liabilities of $5.4 million.
• BitGo Holdings signed a non-binding term sheet to acquire Prime Trust’s parent company, Prime Core Technologies, just a week before the bankruptcy filing.
• Banq’s bankruptcy filing alleges an unauthorized transfer of $17.5 million in assets orchestrated by former officers.

The beleaguered crypto custodian Prime Trust’s subsidiary Banq officially filed for bankruptcy in the U.S. bankruptcy court in the district of Nevada. According to the filings, Banq disclosed its assets totaling around $17.72 million, while its liabilities amount to $5.4 million.

The bankruptcy filing comes just a week after BitGo Holdings, Inc., signed a non-binding term sheet to acquire 100% of the equity of Prime Core Technologies, Inc., the parent company of Prime Trust.

Mike Belshe, CEO and Co-Founder of BitGo stated, This is a landmark transaction, leading a greater shift in the digital asset landscape toward a more secure and sustainable future. With the expected acquisition of Prime Trust, BitGo is well positioned to enhance its best-in-class, trusted solutions and to service the combined customer base.

In its bankruptcy filing, Banq explicitly states that an “unauthorized transfer” took place, resulting in the loss of $17.5 million worth of assets. Former officers, including the ex-CEO, CTO, and CPO of Banq, allegedly orchestrated this transfer, absconding with trade secrets, proprietary information, and technology to the Fortress NFT Group.

Notably, Fortress NFT Group was established by Banq’s former executives, who are now facing a lawsuit from Banq. The lawsuit accuses Fortress of illicitly acquiring trade secret information with the intention of launching competing NFT platforms, namely Fortress NFT and Planet NFT.

Prime Trust also experienced a recent decline in its clientele, including Binance.US, sued by the U.S. Securities and Exchange Commission (SEC) just last week. Additionally, Prime Trust was also providing services to the now-collapsed FTX exchange, which faced bankruptcy in November 2022.

A few days back, Stablecoin TrueUSD (TUSD) lost its dollar peg after a pause in minting activities through Prime Trust. All these issues come as the U.S. Securities and Exchange Commission proposes rule changes limiting crypto companies’ ability to act as a customer’s custodian.