Prime Trust CEO Reveals $8 Million Loss in Unsuccessful Terra Stablecoin Investment

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  • Crypto custodian Prime Trust poured millions into a stablecoin that subsequently crumbled.
  • The CEO's statement adds to the ongoing chain of mismanagement allegations that have been haunting the cryptocurrency sector.

 

In a court filing on Thursday, CEO Jor Law revealed that Crypto custodian Prime Trust suffered losses of $6 million belonging to its clients and an additional $2 million from its own treasury due to an unsuccessful investment in the terraUSD algorithmic stablecoin.

After joining the board on November 29, Law highlighted an incident from January 2021. During this incident, customers were instructed to send funds to an incorrect wallet, which the company couldn't access. Consequently, the company had to expend $76 million to purchase ether (ETH) in order to fulfill withdrawal requests.

The witness testimony submitted during the bankruptcy proceedings is the most recent among a sequence of accusations concerning financial mishandling and inadequate oversight within the cryptocurrency industry. This sector has witnessed former high-ranking officials such as Alex Mashinsky from Celsius and Sam Bankman-Fried from FTX entering pleas of not guilty in response to numerous charges of fraud.

In June, Prime Trust faced a significant financial challenge as it entered receivership and initiated bankruptcy proceedings. The company reported a deficit of $861,000 worth of digital currency and nearly $83 million in fiat currency to the Delaware court, as stated by Law.

The collapse of Terra in May 2022, an endeavor that aimed to link its value to the U.S. dollar through automated trading, reverberated throughout the industry, marking the advent of a fresh crypto winter.

However, even subsequent to that period, the Prime Trust group “continued to ramp up spending, at times incurring seemingly excessive expenditures,” stated Law. He mentioned that in November 2022, the company – which he had not yet taken over – expended $11.1 million while only generating revenues of $2.7 million.

Prime Trust was initially positioned for acquisition by its competitor custodian, BitGo. However, the acquiring party withdrew from the deal in June, citing apprehensions regarding Prime's financial stability. These concerns were validated a mere five days later, as Nevada regulators took steps to put both Prime Trust and its parent company, Prime Core Technologies, under receivership.