Las Vegas-based cryptocurrency custodian Prime Trust filed for Chapter 11 bankruptcy protection on Monday, the latest setback for the troubled financial technology company.

The bankruptcy filing follows Prime Trust's placement into receivership in late June by Nevada regulators, who determined the company was insolvent and unable to service customers. That action came after a series of difficulties for Prime Trust and companies connected to it over the past year.

In June, Prime Trust made headlines when rival crypto custodian BitGo signed a letter of intent to acquire the company, but backed out just two weeks later. BitGo did not give a reason for ending the deal.

Later that month, a Prime Trust subsidiary called Banq filed for bankruptcy due to alleged mismanagement under former CEO Scott Purcell. And Prime Trust partner Abra was hit with a cease and desist order in Texas over securities fraud accusations.


The final blow came when the Nevada Financial Institutions Division (NFID) moved to shut down Prime Trust's operations. The NFID said it was "actively monitoring the solvency of Prime Trust in anticipation of a potential acquisition or merger," but that the company "breached its fiduciary duties to its clients, in violation of Nevada trust laws."

According to regulators, Prime Trust had improperly used customer funds to pay withdrawals since December 2021, after losing access to some customer cryptocurrency wallets.

Regulatory filing reported that Prime Trust owed over $82 million to customers from missing fiat currency deposits, despite having $68 million in digital assets under custody. But an analysis showed most of those funds were held in an illiquid token rather than Bitcoin.

Other crypto companies that kept funds with Prime Trust scrambled to reassure customers and withdraw their assets after the cease and desist order. But some firms like Coinbits still had customer funds trapped with the bankrupt custodian.


Prime Trust said the bankruptcy filing will facilitate an orderly evaluation of options, including a possible sale of the company's assets. But the string of problems over the past year may make finding a buyer difficult.

According to the filing, John Guedry—former president of the Bank of Nevada—will serve as receiver and lead a restructuring committee, and that Judge Susan Johnson of the eighth Judicial District Court of the State of Nevada will oversee the process.

Meanwhile, Prime Trust will continue to operate as “debtors-in-possession” under the bankruptcy court's jurisdiction.

The company said it plans to file a number of motions with the court to facilitate the orderly evaluation of all strategic alternatives, including potentially a sale of the company’s assets and operations as a going concern. These motions are anticipated to include requests to continue to pay wages and provide benefits to ongoing employees as usual.

Prime Trust was founded in 2016 as a blockchain-based infrastructure firm offering application programming interfaces (APIs) for financial institutions, fintech companies, crypto exchanges, and payment platforms. Just last year, the company touted its recognition by Forbes as America’s Best Startup Employer and included in the "Blockchain 50" compiled by CB Insights.

In the bankruptcy filing, Prime Trust said it believes that the commencement of the Chapter 11 process will provide a transparent and value-maximizing process for the benefit of the company’s clients and stakeholders. But it likely spells the end of the road for a company considered to be a major provider of cryptocurrency custodial services just over a year ago.

Editor's note: This story was drafted with Decrypt AI from sources referenced in the text, and fact-checked by Ozawa.

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