The Las Vegas-based cryptocurrency custodian Prime Trust
has filed for Chapter 11 bankruptcy protection. This marks the latest setback
for the financial technology company, which has faced a series of challenges
over the past year, from regulatory intervention to failed acquisition attempts.
The collapse of Prime
Trust gained momentum when it was placed under receivership by the regulators
in Nevada in June. This action was taken due to the company’s insolvency and
inability to serve its customers. Additionally, a prospective acquisition by
rival crypto custodian Bitgo fizzled out without explanation, causing concerns
about the stability of the firm.
In June, Prime Trust’s subsidiary, Banq, filed for bankruptcy due to
alleged mismanagement under former CEO Scott Purcell. Besides that, partner company
Abra faced a cease and desist order in Texas over securities fraud allegations.
The situation worsened
when the Nevada Financial Institutions Division (NFID) stepped in to shut down
Prime Trust’s operations, citing breaches of fiduciary duties and trust laws.
The regulators reportedly discovered that Prime Trust had improperly utilized
customers’ funds to cover withdrawals since December 2021.
“The NFID was
actively monitoring the solvency…
