• Prime Trust, a cryptocurrency custodian, filed for Chapter 11 bankruptcy protection in the district of Delaware.
• The filing comes two months after the Nevada Financial Institutions Division issued a cease and desist order claiming that Prime Trust had major liquidity issues.
• The estimated liabilities (on a consolidated basis) range from $100 million to $500 million, with up to 50,000 creditors.
FTX-Linked Crypto Custodian Files for Bankruptcy Protection
Prime Trust – once a leading cryptocurrency custodian – has recently filed for Chapter 11 bankruptcy protection in Delaware due to alleged liquidity issues. In June, the Nevada Financial Institutions Division issued a cease and desist order claiming that Prime Trust had major liquidity cracks and could not honor clients’ withdrawal requests. This led to a petition being filed by the division to place Prime Trust in receivership.
Estimated Liabilities
According to the firm’s filing, its estimated liabilities (on a consolidated basis) range from $100 million to $500 million, while the number of creditors is up to 50,000. Despite being based in Las Vegas, Nevada, Prime Trust filed for bankruptcy protection in the district of Delaware since it had its domicile, principal place of business or principal assets there for 180 days prior to filing the petition.
Fallen Behemoths
Prime Trust was among the leaders in its field just a few years ago and held funds on behalf of other fallen behemoths such as FTX and Celsius Network.
Nevada Watchdogs‘ Action
The action taken by Nevada watchdogs was based on their belief that Prime Trust operates in an “unsafe and unsound manner” due to its lack of liquidity and inability to honor client withdrawals requests. As such they deemed it necessary for them to take steps towards placing Prime Trust into receivership with their petition earlier this year.
Chapter 11 Bankruptcy Protection
As mentioned before, this ultimately led Prime Trust filing for Chapter 11 bankruptcy protection which provides companies with an opportunity to reorganise their business operations under judicial supervision while protecting them from creditor claims during that period.