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Prime Trust spent $16M in two months despite revenue hit

The report submitted to the bankruptcy court disclosed that Prime Trust’s investment in the TerraUSD (USTC) stablecoin resulted in losses amounting to $8 million. This included the loss of $6 million in client funds and $2 million in treasury funds due to its investment in the now-failed stablecoin.

The filing also highlighted Prime Trust’s revenues took a massive hit during the “crypto winter” in the summer 2022. However, the company continued to spend money, resulting in net losses of $7.4 million in October 2022 and $8.4 million in November 2022.

To cover customer withdrawal requests after losing access to certain funds, Prime Trust purchased $76.4 million worth of Ethereum (ETH). This issue arose after the Las Vegas-based company moved its crypto to the storage service Fireblocks in July 2019 and accidentally provided users with outdated crypto addresses.

“Although crypto winter was not the precipitous event leading to the Receivership and these Chapter 11 Cases, the Company felt the ripple effect caused by crypto winter, which resulted in depressed revenues,” the filing reads.

Despite attempting to raise funds, Prime Trust was unable to return to profitability. Its parent company, Prime Core Technologies, reported the financial losses attributed to the TerraUSD investments “under prior management”, suggesting that these investments played a role in the custodian’s bankruptcy filing.

Prime Trust filed for Chapter 11 bankruptcy protection last week after facing a massive shortfall in its customer funds. The decision came after Prime Trust was placed under receivership by Nevada regulators in late June. This step was taken as the regulators deemed the company insolvent and incapable of serving its customers.

Per its bankruptcy filing, Prime Trust has 25,000 to 50,000 creditors and estimated liabilities ranging between $100 million to $500 million. In contrast, its calculated assets fall within the range of $50 million to $100 million.

The top five unsecured creditors of Prime Trust have amassed claims totaling $105 million, with the biggest claim amounting to $55 million.

Prime Trust’s financial situation at the time of the regulatory petition shows a glaring disparity between assets and liabilities. While the company owed over $85 million in fiat currency to its clients, it held a mere $2.9 million in its coffers. In the digital asset realm, Prime Trust’s liabilities totaled around $69.5 million, slightly surpassing its holdings of $68.6 million.

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