Cryptocurrency custodian Prime Trust has sought Chapter 11 bankruptcy protection in Delaware due to a shortcut in client funds.
In a filing on August 15, the company disclosed having 25,000 to 50,000 creditors, estimated liabilities ranging from $100 million to $500 million, and estimated assets valued between $50 million and $100 million.
In a press release accompanying the filing, Prime Trust stated that it plans to submit multiple motions in bankruptcy court to facilitate the organized assessment of strategic choices, including a potential sale of the company's assets and operations. These motions are also expected to include requests for the continuation of employee wages and benefits.
Among the company's top five unsecured creditors, there are claims totaling around $105 million, with the largest claim amounting to $55 million. Entities such as Prime Core Technologies Inc., Prime Trust, LLC, Prime IRA LLC, and Prime Digital LLC are identifiable able ed as those filing for Chapter 11 relief. The decision to declare bankruptcy followed a cease and desist order issued by Nevada regulators on June 21, asserting that the company was in a financially precarious position that hindered its ability to fulfill customer withdrawal request sts.
In response, Nevada regulators requested on June 26 that the court place Prime Trust under receivership, which was granted on July 18. Prime Trust accepted this action due to a significant disparity between its assets and liabilities. At the time of fi ling, the company owed over $85 million in fiat currency to its clients, while its actual funds amounted to approximately $2.9 million. Its digital assets and liabilities were relatively small, as Prime Trust held around $68.6 million in cryptocurrencies but was in debt by approximately $69.5 million.
