Key Points:
- $8M Loss in Terra Stablecoin Investment
- Additional $76M Expense due to 2021 Wallet Error
- Prime Trust’s Financial Struggles Amidst Industry Challenges
Prime Trust’s CEO, Jor Law, revealed in a recent court submission that the crypto custodian incurred substantial losses. An ill-fated investment in the terraUSD algorithmic stablecoin drained $6 million from client funds and an additional $2 million from the company’s own treasury.
Adding to their financial troubles, Law recounted a January 2021 incident where clients mistakenly directed funds to an inaccessible wallet due to an error, forcing the company to spend a staggering $76 million to acquire ether (ETH) to facilitate withdrawal requests.
This statement, part of ongoing bankruptcy proceedings, is the latest episode in a series of allegations against the cryptocurrency sector, exposing financial mismanagement and inadequate governance. Prominent figures like Alex Mashinsky of Celsius and Sam Bankman-Fried of FTX have faced fraud charges, denying any wrongdoing.
Law testified that in June, shortly before Prime Trust entered receivership and filed for bankruptcy, they faced a shortage of $861,000 in digital currency and nearly $83 million in fiat currency.
The collapse of Terra in May 2022, a project aiming to peg its value to the U.S. dollar through automated trading, had far-reaching consequences for the crypto industry, signaling the onset of a new crypto winter.
Despite these setbacks, Law pointed out that the Prime Trust group continued excessive spending, culminating in November 2022 when the company, still under prior management, expended $11.1 million despite generating only $2.7 million in revenues.
Prime Trust had been in the process of being acquired by rival custodian BitGo, but the deal fell through due to concerns about Prime Trust’s financial stability. These concerns were validated just five days later when Nevada regulators moved to place both the company and its parent entity, Prime Core Technologies, under receivership.
