In what is being viewed as another sour hiccup in the volatile realm of financial technology, Las Vegas cryptocurrency custodian, Prime Trust, has recently filed for Chapter 11 bankruptcy protection, marking a rather grave setback for this flourishing fintech enterprise. The bankruptcy petition, submitted on August 15, highlights the grim specter of liabilities ranging from $100 to $500 million, drawing from an alarming count of between 25,000 to 50,000 creditors.
The picturesque hopes of the company remaining functional, hinging on its estimated assets which are valued at $50 to $100 million, might be adversely affected by recent challenges with regulations and the creditors from Nevada, intensifying the complexity in finding a willing buyer, who wants to venture into this enveloping storm. The company’s future now lies in the hands of its new leader John Guedry – an ex-president of Bank of Nevada, who will be guiding the restructuring process, supervised by Judge Susan Johnson with Prime Trust operating as ‘debtors-in-possession’ during all this.
Nevada’s business regulator hit the company with a cease-and-desist order in June, causing it to declare bankruptcy, due to its severe financial tribulations. A closer review into the company reveals widespread financial turmoil. With its significant fiat and cryptocurrency debts, it came to light that Prime Trust was in the owing of over $85 million in fiat with only $2.9 million available, and a struggle in cryptocurrency debts of over $69.5 million with access to just $68.6 million. Its robust financial woes called for drastic reforms, failing which the company was found wanting in terms of fulfilling customer withdrawal requests.
A few months saw multiple challenges coming through the pipeline for Prime Trust. In June, their subsidiary Banq also filed for bankruptcy due to alleged mismanagement by their former CEO Scott Purcell. Furthermore, their partner, Abra, was dealt a cease-and-desist order in Texas, due to alleged securities fraud. Another grim episode of the saga ensued when Nevada regulators had to take over the company due to insolvency, which led to the company being unable to cater to the demands of its customers.
When the Nevada Financial Institutions Division (NFID) finally decided to close Prime Trust down, citing gross violation of Nevada trust laws, the move was met with a sigh of relief, albeit tinged with regret. Their decision was founded on the determination that Prime Trust had misappropriated customer funds inappropriately for withdrawals since December 2021. The ailing company seemed to be running on fumes, riding on the loss of access to specific customer cryptocurrency wallets.
Despite this grim juncture, other cryptocurrency companies, caught in the crossfire, have been taking measures to reassure and make secure provisions for their customers. Coinbits, for example, having trapped customer funds within Prime Trust, is struggling against the current of related turmoil. The blockchain future, with all its ambiguity and uncertainties, leaves us anticipating a series of moves that could either disrupt or reinforce the precarious balance of the cryptocurrency ecosystem.
Source: Cryptonews
