Canadian crypto custodian Prime Trust filed for bankruptcy under Chapter 11 of the United States Bankruptcy Act. Prime Trust filed for bankruptcy because it has greater liabilities or debts than the value of its assets.
“The company intends to file a number of motions with the bankruptcy court designed to facilitate the company’s orderly evaluation of all strategic alternatives, including the potential sale of the Company’s assets and operations,” he said in a press release released on Monday (14/8).
Prime Trust is known to have worked with a number of crypto companies such as Swan, Abra, Dapper Labs Binance US, Coinbits, and Stably.
However, Swan Bitcoin is known to have severed its partnership with Prime Trust. Many suspect that companies like Swan may experience clawback during the Prime Trust bankruptcy proceedings.
The stablecoin company and trading firm Stably have also cut ties with Prime Trust. Stably has discontinued deposit, withdrawal and buying and selling services on their crypto trading platforms, Stably Ramp and Stably Prime on June 22nd. Stably is currently looking for a new custodial partner.
Prime Trust Debt Amount
Prime Trust owes more than US$85 million to its clients, while its holdings of liquidity assets are only around US$2.9 million. Not only that, Prime Trust also owes US$69.5 million in digital assets in the form of crypto assets, but its asset ownership only amounts to around US$68.6 million.
Overall, the Prime Trust also carries between US$100 million and US$500 million in debt, while estimated assets are only US$50 million to US$100 million.
Regulator Files Prime Trust Bankruptcy Petition
Prime Trust’s decision to file for bankruptcy comes after the Nevada business regulator issued a winding-up and closing order on June 21, 2023.
At that time, the regulator said the company’s financial condition was “less stable” and unable to meet withdrawal requests from customers.
On June 26, Nevada regulators petitioned the court to place the company under curatorship. This petition was approved by the court on 18 July. Prime Trust approved the petition on the basis of a substantial deficit between the value of its assets and liabilities.
In the filing documents, the company stated that it had between 25,000 and 50,000 creditors. There are five major unsecured creditors who have claims of about US$105 million on the company. The largest claim value reached US $ 55 million.
The document also includes the continued payment of salaries and benefits to employees. Prime Trust appears to be preparing for massive layoffs for 75% of its employees.
