Eight months after letting go of its Chief Executive Officer (CEO) Tom Pageler and claiming that the firm has no counterparty exposure to embattled FTX, crypto custodian Prime Trust together with some of its affiliates have filed for Chapter 11 bankruptcy protection in Delaware. Precisely, the bankruptcy protection filing covers Prime Trust LLC, Prime Core Technologies Inc., Prime IRA LLC and Prime Digital, LLC.
The decision came after the firm fell short of completing customers’ withdrawal requests and this has been happening for several months.
Prime Trust’s Liabilities Exceed its Current Assets
An August 15th filing showed that Prime Trust has between 25,000 to 50,000 creditors who it owed between $100 million to $500 million. This liability was enormous compared to its estimated assets of around $50 million to $100 million.
Following this outcome, the company decided 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.”
Special Committee to Supervise Crypto Custodian
Also, the Prime Trust confirmed that the filing comes after the appointment of John Guedry as receiver for the firm as well as the appointment of John Guedry, John Wilcox, and Michael Wyse as the sole members of a designated restructuring committee. These committees will be in charge of supervising and directing the management of the business of the beleaguered crypto custodian as a ‘debtors-in-possession’.
As part of its bankruptcy filing, Prime Trust plans to continue to pay wages as well as provide employee benefits for those that are still with the firm.
The Battle For a Prime Trust Savior
Trouble started for the crypto custodian when it began to lose some of its major clients including Binance U.S. which was sued earlier this year by the United States Securities and Exchange Commission (SEC) for a number of charges. Thereafter, Prime Trust executives tried to sell the company but their effort proved abortive.
Crypto custodian BitGo which recently refused to unwrap $50 million worth of WBTC for FTX sister trading firm Alameda Research, had tried to acquire Prime Trust but ended up withdrawing its request about two weeks later. The decision to file for bankruptcy may have been the last resort.