Prime Trust Files Lawsuit Against Swan Bitcoin Over $1 Billion Asset Transfers Before Collapse

The cryptocurrency landscape continues to grapple with the repercussions of past financial collapses. One notable case is that of Prime Trust, a crypto custodian that went bankrupt in 2023 following the dramatic fall of TerraUSD. In an effort to recover client transfers, Prime Trust’s new management has initiated legal action against Swan Bitcoin. Allegedly, Swan Bitcoin utilized insider knowledge to strategically withdraw assets worth nearly $1 billion before Prime Trust’s financial downfall.

The Fall of Prime Trust: A Chain Reaction

In June 2023, it became apparent that Prime Trust was insolvent. The Nevada regulator intervened, placing the company under administration and initiating bankruptcy proceedings. Similar to other counterparts like Celsius, the collapse was partially attributed to investments in the algorithmic stablecoin TerraUSD. At that time, Prime Trust had invested around $8 million into this venture.
Additionally, complications arose from transitioning infrastructure in 2019 when Prime Trust moved to Fireblocks. Some clients continued depositing funds into outdated storage systems which were inaccessible. These liabilities were covered using deposited funds.

Swan Bitcoin Accused of Strategic Withdrawals

In December 2023, a court approved a restructuring plan for Prime Trust. By 2025, it was determined that all assets should be distributed through competitive processes. As part of these efforts, PCT Litigation Trust—Prime Trust’s successor—filed over 80 lawsuits seeking repayment for transactions conducted within the critical period leading up to bankruptcy.
The lawsuit against Electric Solidus (operating as Swan Bitcoin) alleges asset withdrawals based on insider information provided by a top manager who also served as a paid consultant for Swan Bitcoin. The allegations suggest this privileged insight enabled them to avoid catastrophic losses by moving fiat and crypto assets away from Prime shortly before its bankruptcy declaration.

The Allegations Detailed

According to court documents, Swan Bitcoin managed the withdrawal of approximately 11,992 BTC (valued around $921 million at the current rate), alongside $5 million USDT and 91,444 XRP while receiving $24.6 million in cash.
Despite these serious allegations about insider dealings leading up to their moves prior to filing for bankruptcy protection; representatives from within have made comments suggesting otherwise—asserting instead how client-held assets remain beyond reach when managed via trust accounts under normal unsecured creditor circumstances—and are hopeful courts will confirm such views accordingly moving forward too!
With ongoing ramifications still being felt across sectors since TerraUSD’s initial crash occurred earlier last year—it’s worth recalling here today how Terraform Labs co-founder Do Kwon received fifteen years imprisonment related charges thereafter too!