Cryptocurrency custodian Prime Trust, a subsidiary currently undergoing Chapter 11 bankruptcy proceedings, has revealed a loss of around $8 million in client funds and financial investments related to TerraUSD (USTC).
Prime Core Technologies, in a filing made on August 24 to the US Bankruptcy Court in Delaware, reported the loss of $6 million in client funds and an additional $2 million in TerraUSD investments that were made under the prior administration. The investment loss is believed to be connected to the crash of algorithmic stablecoins in May 2022. Prime Trust linked this investment loss, combined with escalated expenses in October and November 2022, as contributing factors leading to its bankruptcy filing.
While the filing did acknowledge the impact of the "crypto winter," it stated that this event was not the immediate cause behind the company's financial challenges. Prime Trust filed for bankruptcy in the US in August, revealing liabilities estimated to range between $ 100 million and $500 million, with 25,000 to 50,000 creditors. This move followed a court decision in Nevada to appoint a receiver for Prime Trust due to concerns of potential harm to users and the public, along with erosion of confidence in the emerging cryptocurrency market.
An earlier filing in June uncovered that Prime Trust owed over $85 million in fiat currency and $69.5 million in cryptocurrency to its clients. Currently, the company reportedly holds approximately $2.9 million in fiat currency and $68.6 million in cryptocurrency. The Nevada Department of Financial Institutions sought Court intervention in June to place the firm under receivership, partly due to a significant deficit between its assets and liabilities.
The collapse of Terra in 2022 is often cited as a pivotal event that triggered a substantial crash in the cryptocurrency market. During that year, several companies, including FTX, BlockFi, Celsius Network, and Voyager Digital, either shuttered or filed for bankruptcy. Notably , Terraform Labs founder Do Kwon is presently serving a four-month sentence in Montenegro due to the use of forged travel documents; however, potential legal actions against him could extend to the US and South Korea.
