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Bankruptcy Saga: Prime Trust Subsidiary Banq Joins The Queue

ebovictor 2023-06-15 11:00

Recent legal disputes involving Prime Trust, a prominent custodian, and the temporary halt of TrueUSD (TUSD) minting have shed light on the challenges custodians face, as its subsidiary Banq declares bankruptcy.

Recall that Prime Trust faced a lawsuit in 2022, accused of withholding $17 million by Celsius.

Banq’s Bankruptcy Filing And Implications

On June 13, Banq, a subsidiary of Prime Trust, made headlines as it filed for bankruptcy in the U.S. District Court of Nevada.

Banq specializes in providing payment processing services specifically tailored to cryptocurrency businesses.

In the bankruptcy filing, Banq disclosed its financial state, reporting assets totaling $17.72 million while acknowledging liabilities amounting to $5.4 million.

The company’s decision to seek bankruptcy protection at this particular juncture carries significant implications.

The timing of Banq’s bankruptcy filing is notable, occurring less than a week after Prime Core Technologies, the parent company of Prime Trust, was acquired by BitGo, another crypto custodian.

This turn of events raises uncertainties regarding the prospects of Banq and its association with Prime Trust.

The acquisition of Prime Core Technologies by BitGo introduces an additional layer of complexity, as the new parent company may have its strategic priorities and plans, which could impact Banq’s trajectory moving forward.

In the bankruptcy filing, Banq disclosed a troubling revelation.

The company stated that an “unauthorized transfer” amounting to $17.5 million of its assets was made to Fortress NFT Group, a company founded by Banq’s former CEO, CTO, and CPO.

The unauthorized transfer also included allegations of trade secret theft and the misappropriation of proprietary information by these former Banq executives.

Banq has taken legal action against the former C-suite employees, accusing them of launching Fortress NFT using stolen trade secrets and engaging in fraudulent activities to conceal their actions.

The matter was initially directed to arbitration by the court in January, and the proceedings are still ongoing.

Implications For Crypto Custodians

Bankruptcy Prime Trust faced significant challenges when it was sued by Celsius in 2022.

The lawsuit alleged that Prime Trust had withheld $17 million, adding to the custodian’s troubles.

Another repercussion of the custodian’s difficulties emerged when Stablecoin TrueUSD (TUSD), a digital asset tied to the value of the U.S. dollar, announced that it would temporarily halt the minting of TUSD on Prime Trust.

This announcement caused a temporary disruption in TUSD’s dollar peg, leading to concerns among investors.

However, within three days, TUSD regained its pegged price, alleviating some of the worries.

Due to TUSD’s decision, users reported experiencing issues with redeeming TUSD.

Despite the concerns raised, the team behind TUSD reassured users that their operations were functioning smoothly, aiming to restore confidence in the stablecoin’s redeemability.