Crypto custodian Prime Trust has filed for Chapter 11 bankruptcy protection in Delaware after facing a shortfall in customer funds.
The company said in an Aug.15 filing that it has between 25,000 to 50,000 creditors and estimated liabilities between $100 million to $500 million compared to $50 million to $100 million worth of estimated 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 potentially a sale of the Company’s assets and operations,” it said in an accompanying press release.
It added it anticipates the motions will include requests to continue to pay wages and benefits to employees.
The firm’s top five unsecured creditors have claims of roughly $105 million — including the largest claim of $55 million.
Prime Core Technologies Inc., Prime Trust, LLC, Prime IRA LLC and Prime Digital LLC were listed as the entities filing for Chapter 11 relief.
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Prime Trust’s bankruptcy follows Nevada’s business regulator issuing the firm a cease and desist order on June 21, saying its financial condition was “critically deficient” and was unable to honor customer withdrawals.
Days later on June 26, Nevada’s regulator petitioned a court to place the firm into receivership, which the court approved on July 18.
Prime Trust agreed to the petition based on a “substantial deficit between its assets and liabilities.”
At the time of the petition, Prime Trust owed over $85 million in fiat to its clients but only had around $2.9 million. Its digital asset liabilities were smaller, with Prime Trust owing about $69.5 million in crypto while holding around $68.6 million.
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