A document submitted by fallen crypto custodial company Prime Trust on Friday revealed the reasons that fueled bankruptcy filing. In the document, Prime Trust boss Jor Law narrated how a poor management team and the collapsing crypto market battered the firm.
According to Law, who assumed office in December 2022, the previous Prime Trust leadership increased its spending despite revenues being strained. He disclosed that the company spent over $10 million last October against revenue of around $3 million, recording more than $7 million in net loss. The following month, spending increased to $11 million, causing a net loss of $8 million.
Law also explained how the downfall of TerraLuna in May 2022 directly affected Prime Trust. He revealed that the crypto custodian had invested over $6 million in customer funds and approximately $2.5 million from the firm’s treasury into LUNA and Terra UST stablecoin before they both failed.
Prime Trust Locks Itself Out of Its Crypto Wallet
In another shocking event, Law detailed how Prime Trust blocked itself from accessing its crypto wallet under the subtitle “The Wallet Event.” According to Law, the previous leadership used a hardware wallet named “98f Wallet” to store ETH and some ETH-20 tokens.
A year later, Prime Trust transferred the wallet to a system managed by Fireblocks digital security protocol. The crypto custodian, however, didn’t realize that the transfer to the new system was not complete until an undisclosed client requested to withdraw a large amount of ETH that Prime Trust couldn’t fulfill. Even worse, the firm became aware that it no longer possessed the physical devices required to access 98f Wallet.
In the filing, Law stated that Prime Trust is still unable to access the wallet, which blockchain intelligence company Arkham revealed in June that it holds $45 million in various crypto assets.
The CEO also claimed that a group of Prime Trust employees used over $75 million in customer funds to buy ETH in order to fulfill withdrawal requests. That’s when the company’s financial problems escalated. On June 28, when Nevada regulators ordered Prime Trust to shut down, they revealed that the firm owed over $80 million in various fiat currencies and held just $2.5 million.
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