Las Vegas-based cryptocurrency custodian Prime Trust has taken the step to file for Chapter 11 bankruptcy protection, citing an inability to meet customer withdrawal requests. This move comes as a response to mounting financial challenges that have hindered its operations and strained its financial health.
Prime Trust had been grappling with the inability to fulfill customer withdrawals for a considerable period before deciding to file for Chapter 11 protection. The company’s financial difficulties had escalated to the point where it faced a significant shortfall in funds earmarked for customer accounts.
According to the documents filed on August 15, Prime Trust revealed that it is currently facing liabilities that range between $100 million and $500 million. These liabilities starkly contrast with its estimated assets, which fall within the $50 million to $100 million range.
The filing also disclosed that the company’s financial struggles have affected a substantial number of creditors, estimated between 25,000 and 50,000. Among these, the five largest creditors are seeking a combined sum of approximately $105 million. Notably, the leading unsecured creditor is claiming a substantial $55 million.
Prime Trust Seeks a Path Forward
The troubled company aims to navigate through this challenging phase by submitting a series of motions to the Bankruptcy Court. These motions are intended to streamline a comprehensive evaluation of potential strategies, which could include the sale of the company’s assets and operations.
“The Company intends to file a number of motions with the Bankruptcy Court designed to facilitate the Company’s orderly evaluation of all strategic alternatives, including potentially a sale of the Company’s assets and operations as a going concern,” an official press release states.
Meanwhile, the company emphasized its commitment to ensuring the continuation of employee wages and benefits during this process.
Background of the Downfall
The company’s struggles had been building up for some time. The Nevada Department of Business and Industry’s Financial Institutions Division (FID) had flagged the firm’s inability to honor customer withdrawal requests.
This prompted the FID to issue a cease-and-desist order, which was followed by the company being placed into receivership. This sequence of events eventually led to this Chapter 11 filing.
As Prime Trust embarks on the Chapter 11 process, it aims to re-emerge as a viable entity. The company’s leadership claims to be dedicated to exploring avenues that would best serve its clients and stakeholders while navigating through the complexities of the bankruptcy chapter.