Crypto custodian Prime Trust files for bankruptcy in Delaware
The company had previously faced concerns from Nevada’s state regulator over its ability to honor withdrawal requests
Mehaniq/Shutterstock, modified by Blockworks
Prime Trust, a financial technology company that provides custody and other services for digital assets, filed for Chapter 11 bankruptcy in a Delaware court on Monday.
The company said it filed for protection along with some of its affiliates after facing a shortfall in customer funds earlier this year. It has between 25,000 and 50,000 creditors, according to a court filing.
An attempt to raise millions of dollars in emergency fundraising was made earlier in June, but the company was ultimately unable to secure necessary funding. The shortfall was reportedly caused by Prime Trust’s shrinking customer assets, according to a separate June filing.
Nevada’s Department’s Financial Institutions Division ultimately ordered Prime Trust to cease operations that month, citing concerns over its financial health and its inability to honor withdrawal requests.
Even so, the company said it is seeking to emerge from Chapter 11 as a going concern and is open to all strategic options, including a sale of the company, according to a statement.
The company is being overseen by a special restructuring committee, which is expected to file a number of motions with the bankruptcy court in the coming days, including requests to continue to pay wages and provide benefits to employees.
The committee will work with the company’s management team and creditors to develop a plan to restructure the company’s finances and emerge from Chapter 11 as a viable business.
Prime Trust said in its statement it believes Chapter 11 bankruptcy will provide a “transparent and value-maximizing process” for the benefit of its clients and stakeholders.
The bankruptcy is a major setback for Prime Trust, which was once one of the leading financial technology companies in the digital asset space. The company had previously raised over $100 million in funding a year ago from investors such as Kraken Ventures, Mercato Partners and Fin Capital.
It’s the latest in a string of bankruptcy filings born out of last year’s collapse in digital asset valuations — the result of an industry-wide contagion, first initiated by the demise of Terra’s ecosystem in May 2022.
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