Prime Core fell victim to mismanagement, felt ‘ripple effect’ from crypto winter

The company allegedly invested $6 million of customer funds in Terra prior to the collapse

article-image

Parilov/Shutterstock modified by Blockworks

share

In a motion on Thursday, Prime Core’s interim chief executive pointed to a number of instances of improprieties within the company in voicing support for its Chapter 11 bankruptcy proceedings. 

Jor Law, the firm’s interim CEO, highlighted some of Prime Core’s purported more glaring missteps and failures in the filing, extending to the $8 million loss it faced after Terra collapsed — noting that $6 million of that was customer funds — and discussed what he calls the “wallet event.”

Prime Core is the parent company of Prime Trust, the crypto custodian and on- and off-ramp provider that declared bankruptcy earlier this month. The company at the time said it faced a shortfall of customer funds, which had evidently started earlier in the year, without publicly specifying the cause of the discrepancy.

In 2018, Prime Core created cold storage wallets to oversee the storage of ether (ETH), bitcoin (BTC) and other “compliant” crypto tokens. But the brand’s 98f Legacy Wallet, used to store amounts of customer crypto, was able to be accessed by multiple signers — an evident security shortfall. 

The company then used the custodian Fireblocks to store customer assets. 

However, when a customer made a request to withdraw a “significant” amount of ETH in 2021, “certain Company employees discovered that cryptocurrency assets had been forwarded to the 98f Wallet, which was outside of the Fireblocks Platform,” the filing said. 

The improper effort in accessing “wallet access devices” devolved into a number of employees tapping fiat currency from customer accounts, then using those funds to purchase ether to fulfill customer withdrawals, Law said. 

Roughly $76 million was spent on ETH to fund the customer withdrawals, the filing said. 

“Despite these realities, the Company under prior management continued to ramp up spending, at times incurring seemingly excessive expenditures,” Law wrote. He explained that, in October 2022, management “spent approximately $10.5 million against revenues of approximately $3.1 million for a net loss of approximately $7.4 million.” 

That kind of spending wasn’t abnormal either, with Law giving a November example that demonstrated similar amounts.  

He also outlined the regulatory issues the company faced. As previously reported by Blockworks, Prime Trust attempted to quickly raise cash before announcing a deal with BitGo

BitGo later terminated its plan to buy Prime Trust.

Law said that during that time, “the Company was in the midst of this capital raise when state regulators began taking actions that resulted in the revocation or suspension of certain of the Company’s Licenses.”

This led to customers leaving and “a precipitous decline in the Company’s revenues, and led to the issuance of the Cease and Desist Order,” the filing said.

According to the filing, the company seeks to protect assets, “maintain and reinstate licenses” and pursue “third-party financing, a recapitalization, and a potential sale.”


Get the news in your inbox. Explore Blockworks newsletters:

Tags

Decoding crypto and the markets. Daily, with Byron Gilliam.

Upcoming Events

Old Billingsgate

Mon - Wed, October 13 - 15, 2025

Blockworks’ Digital Asset Summit (DAS) will feature conversations between the builders, allocators, and legislators who will shape the trajectory of the digital asset ecosystem in the US and abroad.

recent research

Unlocked by Template (10).png

Research

Innovations on Aptos’ technical design through Raptr, Shardines, and Zaptos approach near-optimal latency and throughput by unlocking 100% utilization of network resources, with the capacity to settle 260k transactions per second with latencies less than 800ms. The original Move language was revamped with the launch of Move 2, supporting more expressivity in smart contract logic and a scalable ability to interact with high volume datasets. The ecosystem has benefitted from strong asset inflows, now hosting over $1.3B in stablecoins, $450M in bridged BTC, and $530M in RWAs. Activity in the Aptos ecosystem has grown notably over the past year, with monthly application revenue reaching ~$835k and monthly DEX volumes growing to over $5B, both at new all time highs.

article-image

Interchain Labs will focus on sovereign L1s and institutional demand, abandoning plans for smart contracts on the Cosmos Hub

article-image

Also, only three tokens have outperformed bitcoin so far this year: XMR, HYPE and SKY

article-image

The fund group has submitted proposals in recent months for other funds that would hold litecoin, solana, XRP, HBAR, Sui and others

article-image

Momentum’s back — BTC leads, risk assets follow

article-image

Ondo Finance’s acquisition of blockchain development company Strangelove follows its buy of Oasis Pro

article-image

Cryptocurrency and stock traders alike had a lot to unpack Wednesday