Prime Trust, a cryptocurrency custodian, lost $6 million of client funds and $2 million from its own treasury in a failed investment in the terraUSD algorithmic stablecoin, according to CEO Jor Law in a court filing on Thursday.Law, who assumed his position on Nov. 29 after sitting on the board, also brought up a January 2021 event in which users were instructed to move money to a wallet that was inaccessible to the business and as a result, the business had to spend $76 million to purchase ether (ETH) in order to cover withdrawal demands.
The witness statement submitted as part of bankruptcy proceedings is the most recent in a string of accusations of financial mismanagement and bad governance in the cryptocurrency industry, which have resulted in former executives like Alex Mashinsky of Celsius and Sam Bankman-Fried of FTX pleading not guilty to numerous fraud charges.According to Law, Prime Trust had a customer deficiency of $861,000 in digital currency and roughly $83 million in fiat in June. Prime Trust was soon placed into receivership and filed for bankruptcy.
The collapse of Terra in May 2022, which attempted to employ automated trading to peg its value to the US dollar, sent shockwaves through the industry and signaled the beginning of a new crypto winter.Even yet, Law said that the Prime Trust group “continued to ramp up spending, at times incurring seemingly excessive expenditures,” adding that in November 2022 the business—which was not yet under his management—spent $11.1 million against only $2.7 million in sales.
Rival custodian BitGo was planning to purchase Prime Trust, but the deal fell through because of worries about Prime’s financial stability. Those worries were confirmed just five days later when Nevada regulators filed to put Prime Trust and its parent company, Prime Core Technologies, into receivership.