- Crypto custodian, Prime Trust, files for bankruptcy at a court in Delaware.
- Prime Trust is prepared for the sale of its assets and operations.
Former Binance US crypto custodian, Prime Trust, seeks Bankruptcy Protection
Prime Trust, a crypto custodian company, has opted for bankruptcy protection from a Delaware court.
After stormy financial and regulatory struggles, the former Binance US crypto custodian has filed Chapter 11.
The news of the bankruptcy filing follows a series of connecting events like the recent appointment of the company’s CEO and a restructuring committee, the order to cease operations made in June by the financial regulators in Nevada, amongst other struggles.
One of the telltale signs of the company’s financial instability was the layoff of one-third of its workers and the suspension of operations in Texas.
The bankruptcy filing is the latest update in Prime Trust’s lengthy financial instability saga.
Despite the contrasting circumstances and the presumed reasons for the bankruptcy, Prime Trust promises to ensure transparency and protect the stakeholders’ interests.
Prime Trust filed for bankruptcy on Monday after facing a shortage in customer funds this year.
According to the court filing, the crypto custodian has 25,000 to 50,000 creditors.
A restructuring committee is handling Prime Trust’s bankruptcy motions. One of their proposed motions includes a request to pay the wages and benefits of the company’s employees.
The committee is optimistic about the aftermath of the bankruptcy proceedings.
Blockworks reported that the committee intends to develop a financial restructuring plan with the company’s management team.
In a statement, Prime Trust shared its plan to prepare for a potential sale of the company.
“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 potentially a sale of the Company’s assets and operations,” It said in a press release.
The liabilities of the custodian company are estimated to be between $100 million to $500 million, while the estimated assets are worth between $50 million to $100 million.
Although the company attempted an emergency fundraising in June, the plan fell through due to customers’ dwindling assets. A potential sale of the company also fell through, compounding its financial problems.
The Nevada Financial Institution Division decided to step in with plans to disrupt the company’s operations.
The Nevada financial regulator ordered Prime Trust to cease operations in June over financial health concerns.
This led to suspending services on Prime Trust, which gravely affected other companies.
Several crypto firms that utilized Prime Trust crypto custodian services encountered difficulties. Stably, a fintech startup in Seattle, halted its services temporarily. Strike, another crypto firm that worked with the crypto custodian, also suspended direct deposits.
The Nevada financial regulator released an official report citing its reasons for suspending Prime Trust services.
The Nevada Financial Institution Division stated that the crypto custodian lacked the ability “to honor customer withdrawals due to a shortfall of customer funds caused by a significant liability on the respondents’ balance sheet.”
The Division also added that Prime Trust violated its fiduciary obligations.
The current state of the crypto custodian contrasts highly with the former leading face of financial technology companies in the crypto industry.
