Prime Trust, LLC, a prominent player in digital asset custody, has filed voluntary petitions for Chapter 11 bankruptcy. The company said in a statement that the filing will allow it to “maximize value for its clients and stakeholders through a transparent and orderly process.”
Prime Trust is a Nevada-based company that provides a variety of services to the cryptocurrency industry, including custody, trading, and settlement. The company had been struggling financially for some time, and in July, Nevada courts ordered it into temporary receivership. The Chapter 11 filing lists liabilities of between $100 million and $500 million, and assets between $50 million and $100 million. The company’s top 50 unsecured creditors have a combined claim of $144 million.
Prime Trust is a “qualified custodian,” which means that customer assets are supposed to be protected from the bankruptcy of the custodian. However, it is not clear whether this will be the case in Prime Trust’s case. The company said that it will continue to operate as “debtors-in-possession” during the bankruptcy process. It plans to file several motions with the bankruptcy court to facilitate the “orderly evaluation of all strategic alternatives,” including the sale of the company’s assets and operations.
The bankruptcy filing is a significant development for the cryptocurrency industry. Prime Trust was a major player in the industry, and its failure could have a ripple effect on other companies.
The company’s financial crisis began in June when the Nevada Financial Institutions Division (NFID) issued a cease and desist order against Prime Trust due to the company’s inability to fulfill customer withdrawal requests. This was followed by the bankruptcy declaration of Prime Trust subsidiary Banq on June 14 and the termination of BitGo’s planned acquisition of Prime Trust on June 22.
The full impact of Prime Trust’s bankruptcy filing is still unclear. However, it is a reminder of the risks involved in the cryptocurrency industry. Investors should carefully consider the risks before investing in any cryptocurrency-related company.