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Swan Bitcoin Faces Bankruptcy Lawsuit Over Significant Withdrawals from Prime Trust
Swan Bitcoin is embroiled in a bankruptcy lawsuit in the Delaware Court, accused of pulling substantial cryptocurrency assets from Prime Trust prior to the custodian’s collapse. The legal action, initiated by the PCT Litigation Trust, aims to recover nearly US$1 billion (approximately AU$1.4 billion) tied to Prime Core Technologies’ bankruptcy proceedings.
Allegations of Insider Knowledge
The lawsuit contends that Swan Bitcoin was privy to confidential details regarding the financial instability of Prime Trust, which enabled the company to withdraw significant funds ahead of the custodian’s Chapter 11 filing. While many customers of Prime Trust faced heavy losses, Swan allegedly mitigated its own risk by acting on inside information.
Details of the Assets in Question
The assets involved in this case primarily consist of approximately 11,994 BTC, estimated to be worth around US$938 million (AU$1.31 billion). Additionally, the lawsuit outlines cash reserves of US$24.66 million (AU$34.52 million), stablecoins totalling about US$5 million (AU$7 million), and 91,144 XRP valued at roughly US$129,484 (AU$181,278). The litigation trust’s objective is to reclaim these assets for distribution among creditors affected by the bankruptcy.
Communication Prior to Regulatory Intervention
The court documents suggest that a senior executive from Prime Trust, who also had advisory connections with Swan, exchanged encrypted messages with Swan’s CEO, Cory Klippsten, shortly before Nevada regulators stepped in. Notably, these messages were programmed to automatically delete within 24 hours during the critical timeframe leading up to Swan’s withdrawals.
Prime Trust’s Downfall
In June 2023, Prime Trust faced regulatory shutdown by the state of Nevada, ultimately leading to its filing for bankruptcy two months later, amid accusations of its inability to meet customer obligations.
As legal proceedings unfold, the outcome of this case could significantly impact creditor recovery efforts and set precedents regarding insider knowledge and financial conduct within the cryptocurrency industry.
