Prime Trust lost $8 million after the collapse of Terra
Date: 2023-08-25 Author: Karina Ziganova Categories: BUSINESS, IN WORLD
Failed cryptocurrency custodian Prime Trust revealed new details about its past financial shortcomings in a filing filed with the bankruptcy courts on August 24.
This filing indicates that Prime Trust's investment in the stablecoin TerraUSD (USTC) resulted in millions of dollars in losses for the company. In particular, the company's investment in the now bankrupt stablecoin resulted in the loss of $6 million in client funds and $2 million in treasury funds, for a total of $8 million.
The filing also notes that the “crypto winter” of summer 2022, which occurred around the time of the Terra crash and resulted in industry-wide liquidity losses, led to lower revenues. Prime Trust continued to spend money despite declining revenue: in October 2022, the company's expenses resulted in a net loss of $7.4 million, and in November 2022, its expenses resulted in a net loss of $8.4 million.
Prime Trust also said it purchased $76.4 million worth of Ethereum (ETH) to cover customer withdrawal requests after it lost access to certain funds.
This issue arose after Prime Trust moved its cryptocurrency to Fireblocks storage service in July 2019. After the address transfer, Prime Trust accidentally instructed users to send funds to a crypto address that is no longer in use, resulting in the firm being unable to access those funds. Prime Trust had to purchase a new cryptocurrency to cover user withdrawals.
Prime Trust also tried to raise funds but failed to become profitable again.
The rollback of Prime Trust began a few months ago
Prime Trust began suspending operations earlier this summer. Nevada regulators asked for the firm to go into receivership on June 27. Later, on July 18, the courts ruled that the firm was bankrupt. Prime Trust filed for bankruptcy on 14 August.
In its current filing, Prime Trust said that at the time of its bankruptcy, there was a $82.8 million fiat deficit and a $861,000 crypto deficit, in line with previous reports.
Although broader details of the Prime Trust's failure were made public in June, the latest filing provides more details on the amount.
