Crypto Custodian Prime Trust Reports $8 Million Loss in TerraUSD Investments, Contributing to Bankruptcy Filing and Industry Fallout
Summary:
Parent company of crypto custodian Prime Trust, facing bankruptcy, reports $8M loss in client and treasury funds through TerraUSD investments. Collapse of Terra in 2022 contributed to bankruptcy filing, resulting in multiple firms in the crypto industry experiencing financial difficulties. Founder of Terraform Labs facing legal consequences.
Prime Trust's parent company, currently undergoing Chapter 11 bankruptcy proceedings, has revealed that they lost approximately $8 million in client and treasury funds as a result of investments in TerraUSD (UST). In a court filing made on August 24th, Prime Core Technologies stated that the losses occurred under previous management, with $6 million from client funds and $2 million from treasury funds being invested in UST, seemingly during the collapse of the algorithmic stablecoin in May 2022. This investment, coupled with increased spending in October and November 2022, contributed to the company's decision to file for bankruptcy. The court filing acknowledged that while the "crypto winter" was not the sole cause of the bankruptcy, it did have an impact on the company's revenues. Prime Trust filed for bankruptcy in the United States in August, reporting liabilities of $100 million to $500 million and between 25,000 to 50,000 creditors. This move followed a court order in Nevada appointing a receiver for Prime Trust due to concerns of potential harm to users, the public, and confidence in the cryptocurrency market. In a June filing, it was revealed that Prime Trust owed over $85 million in fiat currency and $69.5 million in crypto to its clients, despite holding only $2.9 million in fiat and $68.6 million in crypto. The collapse of Terra in 2022 was considered a significant factor in the subsequent crypto market crash, resulting in the downfall or bankruptcy filings of various firms in the industry, including FTX, BlockFi, Celsius Network, and Voyager Digital. Do Kwon, the founder of Terraform Labs, is currently serving a prison sentence in Montenegro for using falsified travel documents, and he could face additional legal action in the United States and South Korea.
Published At
8/24/2023 8:30:00 PM
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