Renowned cryptocurrency institution, Prime Trust, has found itself in a difficult financial situation, leading to filing for bankruptcy protection under Chapter 11. This move came after the company failed to meet customer withdrawal requests for several months.
Prime Trust, serving as a cryptocurrency custodian, filed for bankruptcy protection in Delaware in response to customer fund shortages.
According to documents dated August 15, the company reported having between 25,000 to 50,000 creditors and estimated liabilities ranging from $100 million to $500 million, with estimated assets valued between $50 million and $100 million. Such a vast disparity between assets and liabilities underscores the company’s complicated financial situation.
In a press release, Prime Trust announced it intends to file several motions in bankruptcy court to facilitate the company in assessing all strategic alternatives. This might even lead to a potential sale of the company’s assets and operations. Additionally, it was emphasized that these motions will include requests to continue salary payments and benefits for employees.
Among the company’s top five unsecured creditors, claims amounting to about $105 million were filed, with the largest claim being $55 million.
The bankruptcy protection application covers several entities associated with Prime Trust, such as Prime Core Technologies Inc., Prime Trust, LLC, Prime IRA LLC, and Prime Digital LLC.
Remember, this step is the latest in a series of unfavorable events for Prime Trust. As early as June 21, the Nevada business regulator issued a cease and desist order to the company, stating that its financial condition is “critically low”. The company failed to meet customer withdrawal requests. Shortly afterward, on June 26, the Nevada regulator filed a request to place the company under legal supervision, which was approved on July 18.
Prime Trust’s decision to file was based on a “significant deficit between assets and liabilities”. At the time of filing, Prime Trust owed over $85 million in cash to its clients, having only about $2.9 million on hand. Their digital asset obligations were smaller, with Prime Trust owing about $69.5 million in crypto while holding assets valued at approximately $68.6 million.
The next steps Prime Trust takes regarding the current crisis will be closely watched by the entire crypto industry and its regulating bodies, potentially leading to further changes in cryptocurrency regulations in the future.
