Prime Trust Files for Bankruptcy Protection Following Financial Mismanagement

One sentence summary – Cryptocurrency custodian Prime Trust has filed for bankruptcy protection after facing financial difficulties caused by irresponsible spending, misjudgment of the crypto market’s collapse, investment losses in TerraLUNA, and regulatory scrutiny, including unauthorized use of client funds, leading to a failed merger with BitGo and massive debts owed to clients.

At a glance

  • Prime Trust, a cryptocurrency custodian, has filed for bankruptcy protection.
  • The company’s financial difficulties are attributed to irresponsible spending and a misjudgment of the crypto market’s collapse in the summer of 2022.
  • Prime Trust spent $10.5 million in October and $11.1 million in November, resulting in significant net losses.
  • The collapse of TerraLUNA in May 2022 had a profound impact on Prime Trust, as it had invested $6 million of client funds and $2 million from its own treasury into Terra.
  • Prime Trust encountered a major setback when it locked itself out of its own cryptocurrency wallet, which contained a token portfolio valued at over $45 million.

The details

Prime Trust, a cryptocurrency custodian, has filed for bankruptcy protection.

The company’s financial difficulties are attributed to irresponsible spending and a misjudgment of the crypto market’s collapse in the summer of 2022.

In October, Prime Trust spent $10.5 million, followed by an expenditure of $11.1 million in November, resulting in significant net losses.

The collapse of TerraLUNA in May 2022 also had a profound impact on Prime Trust.

The company had invested $6 million of client funds and $2 million from its own treasury into Terra.

Additionally, Prime Trust encountered a major setback when it locked itself out of its own cryptocurrency wallet.

This wallet contained a token portfolio valued at over $45 million.

The company’s migration to a new wallet system was incomplete, and as a result, it continued to provide customers with addresses that deposited funds into the inaccessible wallet.

To meet withdrawal requests, Prime Trust employees resorted to using fiat currencies from client accounts to purchase ETH, totaling over $76 million.

This unauthorized use of client funds raises serious concerns about the company’s financial practices.

In June, Prime Trust faced regulatory scrutiny, leading to the collapse of a merger deal with BitGo.

Further complications arose when Nevada regulators discovered that Prime Trust had accumulated massive debts, both in fiat and cryptocurrencies, owed to its clients.

Consequently, Nevada regulators sought to shut down Prime Trust.

Finally, due to these financial hardships, Prime Trust filed for bankruptcy on August 14.

This comprehensive brief outlines the key facts surrounding Prime Trust’s bankruptcy.

It covers the company’s financial mismanagement, its investment in TerraLUNA, the issue with its inaccessible cryptocurrency wallet, the unauthorized use of client funds, regulatory scrutiny, the failed merger with BitGo, and the subsequent bankruptcy filing.

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– Prime Trust, a crypto custodian, has filed for bankruptcy protection.
The company suffered from irresponsible spending and misjudged the crypto market’s collapse in summer 2022.
– Prime Trust spent $10.5 million in October and $11.1 million in November, resulting in significant net losses.
The collapse of TerraLUNA in May 2022 also impacted Prime Trust, as it had invested $6 million in client funds and $2 million from its own treasury into Terra.
– Prime Trust locked itself out of its own cryptocurrency wallet, which contained a token portfolio worth over $45 million.
The company’s migration to a new wallet system was incomplete, and it continued to provide customers with addresses that deposited funds into the inaccessible wallet.
– Prime Trust employees used fiat currencies from client accounts to purchase ETH and meet withdrawal requests, totaling over $76 million.
In June, Prime Trust faced regulatory scrutiny and saw a merger deal with BitGo collapse.
– Nevada regulators moved to shut down Prime Trust after discovering the company owed massive debts in fiat and cryptocurrencies to clients.
– Prime Trust filed for bankruptcy on August 14.

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