Prime Trust, LLC, a prominent player in digital asset custody, has archived voluntary filings for Chapter 11 bankruptcy.
According to a report released by the company on Aug. 14, the process is expected to provide a “transparent and value-maximizing process for the benefit of its customers and stakeholders.”
The Nevada-based company is known for its innovative digital asset management services. As reported on July 18, Nevada courts placed Prime Trust in temporary receivership, signaling the serious financial problems it faced.
The company’s July financial shortfall reportedly exceeded $82 million. As of Chapter 11 filing, the consolidated list of the 50 largest unsecured creditors stands at $144 million.
Further, divided into four files Prime Trust group companies, Prime Core Technologies Inc., Prime Digital, LLC, Prime IRA LLC, and Prime Trust, LLC, have recorded liabilities of $100 million to $500 million, and assets of between $50 million and $100 million.
The potential impact on the industry could be significant given the central role it plays in providing custody services to institutional crypto investors.
Prime Trust is a ‘qualified custodian’, which means that all assets in the client’s custody must be protected from the custodian’s bankruptcy. CryptoSlate has contacted Prime Trust for confirmation but has not received a response as of this writing.
Chapter 11 concludes.
The decision to file for Chapter 11 bankruptcy follows the permanent appointment of former bank executive John Guedry as trustee for the company. Guedry, along with John Wilcox and Michael Wyse, form a special restructuring committee with the authority to oversee the company’s pending bankruptcy cases.
As the company continues to operate as “debtors-in-possession,” it plans to file several motions in bankruptcy court to facilitate the “orderly review of all strategic alternatives.” These measures may include the sale of the company’s assets and operations.
Prime Trust’s financial crisis, which began almost a month before the bankruptcy, has rippled effects across the crypto industry.
It began with the Nevada Financial Institutions Division (NFID) issuing a cease and desist order on June 21 due to the company’s inability to meet customer withdrawal requests.
This was followed shortly by the bankruptcy of Prime Trust subsidiary Banq on June 14 and the termination of BitGo’s planned acquisition of Prime Trust on June 22.
Further details regarding the court-supervised proceedings will be made available as the proceedings progress. They can be accessed through the DDebtors restructuring website.