Up to $500M in liabilities as crypto custodian Prime Trust files Chapter 11 bankruptcy
Prime Trust, LLC, a well-known player in the digital asset custody space, has filed voluntary petitions for Chapter 11 bankruptcy, citing financial difficulties. The company’s financial deficit in July reportedly exceeded $82 million, with liabilities between $100 million and $500 million.
Prime Trust, based in Nevada, is renowned for its innovative services in digital asset management. However, the Nevada courts ordered the company into temporary receivership in July, signaling the severity of its financial troubles.
The Chapter 11 bankruptcy filings for the various Prime Trust group companies, including Prime Core Technologies Inc., Prime Digital, LLC, Prime IRA LLC, and Prime Trust, LLC, reveal liabilities ranging from $100 million to $500 million, with assets estimated to be between $50 million and $100 million.
The potential impact on the cryptocurrency industry could be significant, given Prime Trust’s crucial role in providing custodial services to institutional crypto investors. As a qualified custodian, Prime Trust is obligated to protect all customer custodied assets from the bankruptcy of the custodian. However, it is yet to be confirmed whether this protection will be upheld.
The decision to file for Chapter 11 bankruptcy comes after the appointment of former banking executive John Guedry as the receiver for the company. Guedry, along with a special restructuring committee, will oversee the ongoing bankruptcy cases. Prime Trust will continue to operate as “debtors-in-possession” during this time.
The company intends to file motions with the Bankruptcy Court to facilitate the orderly evaluation of strategic alternatives, which may involve selling its assets and operations. These measures aim to maximize value for Prime Trust’s clients and stakeholders.
The financial crisis of Prime Trust began with a cease and desist order from the Nevada Financial Institutions Division in June, as the company struggled to fulfill customer withdrawal requests. This was followed by the bankruptcy filing of Prime Trust subsidiary Banq and the termination of BitGo’s planned acquisition of Prime Trust.
As the court-supervised proceedings unfold, further details will become available. Interested parties can access information on the Debtors’ restructuring website.
In conclusion, Prime Trust’s Chapter 11 bankruptcy filing, with liabilities potentially reaching $500 million, has raised significant concerns within the cryptocurrency industry. The company’s role as a custodian for institutional crypto investors has prompted speculation about the potential impact on the broader market. As the proceedings progress, stakeholders will closely monitor the situation for any developments that may affect the industry.