Fortress Trust Accused of Embezzling $11 Million in Client Funds
Date: 2025-10-31 Author: Oliver Abernathy Categories: BUSINESS
The FID-licensed company previously claimed to oversee deposits of approximately $12 million in cryptocurrency and fiat. However, an audit revealed that the actual amount of funds was only $1.2 million, indicating a liquidity shortfall of approximately $11 million.
FID noted that Fortress Trust's situation is reminiscent of the collapse of Prime Trust in 2023. At that time, the custodial company lost $80 million due to investments in the collapsed stablecoin TerraUSD and the use of client funds for payouts. Similar indicators have been observed at Fortress: concealing losses for months, a lack of proper management oversight, and spending client assets to cover internal liabilities.
Both companies were founded by serial fintech entrepreneur Scott Purcell. He stepped down as CEO of Fortress on October 25, 2023, but remained a board member of parent company Elemental Financial Technologies.
In 2023, Ripple planned to acquire Fortress Trust for $15 million, but abandoned the deal following a phishing attack on the custodian and a user data leak. To maintain trust, Ripple compensated for some of the lost funds, but the final purchase never took place.
Experts believe the cases of Prime Trust and Fortress Trust demonstrate a recurring risk in the custodial services industry: insufficient internal controls, high investment risks, and hidden losses can lead to significant losses of client assets. These events increase regulatory scrutiny of digital asset managers and highlight the importance of transparency and financial discipline.
Fortress Trust's problems also highlight the need to carefully evaluate potential partners in the cryptocurrency industry. Investors and companies must consider not only market reputation but also internal financial mechanisms and client fund management practices.
Against the backdrop of these events, there is growing interest in stricter regulatory standards for custodial companies and enhanced liquidity controls. Regulators are increasingly demanding reporting and transparent procedures to avoid a recurrence of similar incidents.
The Fortress Trust case could serve as another warning sign for the cryptocurrency industry: control over client funds and transparency of financial transactions remain key factors in ensuring trust and market stability.
