Prime Trust – a once-leading cryptocurrency custodian – filed for Chapter 11 bankruptcy protection in Delaware approximately two months after the Nevada Financial Institutions Division claimed it operates in an “unsafe and unsound manner.”
The company was among the leaders in its field a few years ago, holding funds on behalf of other fallen behemoths such as FTX and Celsius Network.
The Latest to Go Bankrupt
According to the firm’s filing, its estimated liabilities (on a consolidated basis) range from $100 million to $500 million, while the number of creditors is up to 50,000.
Despite being based in Las Vegas, Nevada, Prime Trust filed for bankruptcy protection in the district of Delaware since it had its domicile, principal place of business, or principal assets in this region for 180 days prior to the date of the petition.
The cryptocurrency custodian had regulatory issues with the Nevada watchdogs in June when they issued a cease and desist order, claiming the firm had major liquidity cracks and could not honor clients’ withdrawal requests. Shortly after, the Nevada Financial Institutions Division filed a petition to place Prime Trust in receivership.
“With consideration of the above, Prime is in an unsafe financial condition and/or is insolvent. Additionally, Prime’s condition will only progressively worsen as customers continue to withdraw from Prime,” the agency maintained at the time.
The regulator estimated that the crypto firm owed more than $85 million in fiat currency to customers but had only $2.9 million. It also had $69.5 million worth of cryptocurrency debt, while its digital asset holdings equaled $68.6 million.
Prime Trust was once an industry leader, storing assets and providing services to the defunct cryptocurrency exchange FTX and the crypto lender Celsius Network. Both firms filed for bankruptcy last year, adding their names to the long list of entities that collapsed amid the prolonged bear market or some alleged fraudulent actions.
Who Else Went Bankrupt?
The crypto winter, which seemed to have intensified in the spring of 2022 (around the Terra crash), hampered investors’ interest and significantly affected the operation of many firms serving the sector. As such, some could not operate properly and filed for bankruptcy protection.
The hedge fund Three Arrows Capital (3AC), the brokerage company Voyager Digital, the BTC miner Core Scientific, the digital asset lender BlockFi, and the US arm of Bittrex are among the well-known examples that are now defunct due to various reasons.