A string of bankruptcies over the past few years has hurt the industry. In the last one year, dozens of crypto-focused companies, including exchanges and venture capitals have filed for bankruptcy during heightened volatility or downtrend.
Banq, a subsidiary of Prime Trust, filed for bankruptcy on June 13, 2023. The process of filing was initiated in the District Court of Nevada. The crypto custodian of Prime Trust listed assets worth 17.72 Million US Dollars and liabilities amounting to 5.4 Million US Dollars.
The crypto custodian’s move to opt for bankruptcy came after its parent company Prime Trust finalized its acquisition deal with BitGo, although the agreement is pending and still requires regulatory approval.
Banq revealed in its court filing that $17.5 Million worth of assets was transferred to Fortress NFT Group in an ‘unauthorized transaction,’ which might be a reason for the financial crisis in the company.
As per the court filing, several unapproved transactions were initiated with the former executive of Banq, including trade confidential and proprietary information. The Fortress NFT Group was founded by the Chief Executive, Chief Technology, and Chief Product Officer of Banq.
According to people familiar with the matter, Banq has provoked legal action over an allegation that former employees have secretly stolen confidential trade information to successfully launch Fortress NFT and been involved in committing fraud to cover the track.
Why Is Celsius Blamed For Prime Trust Struggle?
In late August, 2022, Celsius Network, now a bankrupt crypto lender, lodged a lawsuit against Prime Trust, claiming that its business partner held $17 Million in crypto. Meanwhile, Prime Trust claims that Celsius’s bankruptcy is guiding to torture it legally.
In the filing, Celsius argued that under the Bankruptcy code, Prime Trust must send Celsisus’s every property in possession of Prime Trust as the bankruptcy proceedings start.
The remaining crypto assets are also under its possession and need to be turned over pursuant to section 542 of the Bankruptcy Code. In June, 2021, Prime Trust terminated its partnership with Celsius, which cited “red flags.”
On June 8, 2023, the crypto custodian BitGo disclosed that it had signed a term sheet to acquire the equity of Prime Core Technologies, the parent organization of Prime Trust. It is important to note that both companies provide custody services.
As per BitGo’s official statement, “The following purchase will make BitGo the leading global asset company to offer a full suite of resolutions for institutions and financial service providers.”
Prime Trust has been struggling for some time. In early January, it laid off one-third of the entire crew. BitGo was among those companies which were likely to get acquired by Galaxy Digital for a total of $1.2 Billion, but due to some uncertainty, the deal was canceled.
