Hold onto your hats, crypto enthusiasts! Prime Trust, the renowned crypto custodian, has found itself in a whirlwind of financial turbulence. The company lost a whopping $6 million of client funds and an additional $2 million from its own treasury, all thanks to a doomed investment in the terraUSD algorithmic stablecoin. And if you think that’s the end of the story, there’s more drama to unpack.
CEO Jor Law, who stepped into his role on Nov. 29 after a stint on the board, spilled the beans in a recent court filing. But the terraUSD debacle isn’t the only skeleton in Prime Trust’s closet. Cast your mind back to January 2021. Customers were mistakenly told to send funds to the wrong wallet, which the company couldn’t access. The aftermath? A staggering $76 million spent on ether (ETH) to meet withdrawal requests.
This courtroom revelation is just the tip of the iceberg in a series of financial mismanagement allegations that have rocked the crypto sector. Bigwigs like Celsius’ Alex Mashinsky and FTX’s Sam Bankman-Fried are also in the hot seat, pleading not guilty to multiple fraud charges.
June was a particularly grim month for Prime Trust. After being taken into receivership and filing for bankruptcy, the company reported a jaw-dropping customer shortfall: $861,000 in digital currency and a staggering $83 million in fiat. And who can forget the May 2022 Terra fiasco? The platform, which aimed to peg its value to the U.S. dollar using automated trading, collapsed, sending shockwaves throughout the crypto world and ushering in a new crypto winter.
Despite these setbacks, Prime Trust didn’t tighten its purse strings. In November 2022, the company splurged $11.1 million, even though its revenues were a mere $2.7 million. And just when it seemed like there might be a silver lining with a potential acquisition by BitGo, the deal fell apart. Concerns about Prime Trust’s financial health were the dealbreaker, and these concerns were validated when Nevada regulators stepped in.
In a nutshell, Prime Trust’s journey from a promising crypto custodian to facing allegations and financial challenges serves as a cautionary tale for the crypto world. It underscores the importance of sound financial practices and the perils of mismanagement.
