Recent legal disputes involving the prominent custodian Prime Trust and the temporary halt of TrueUSD (TUSD) minting have highlighted the challenges faced by custodians in the cryptocurrency industry. The troubles started when Prime Trust was sued by Celsius in 2022 for allegedly withholding $17 million. These disputes have led to the subsidiary of Prime Trust, Banq, declaring bankruptcy.
On June 13, Banq filed for bankruptcy in the U.S. District Court of Nevada. Banq specializes in providing payment processing services tailored to cryptocurrency businesses. In its bankruptcy filing, Banq disclosed its financial state, reporting assets totaling $17.72 million while acknowledging liabilities of $5.4 million. The timing of Banq’s bankruptcy filing is significant as it comes less than a week after Prime Core Technologies, the parent company of Prime Trust, was acquired by BitGo, another crypto custodian. This acquisition introduces additional complexities and raises uncertainties regarding Banq’s future association with Prime Trust.
In the bankruptcy filing, Banq revealed an unauthorized transfer of $17.5 million of its assets to Fortress NFT Group, a company founded by Banq’s former CEO, CTO, and CPO. The transfer also involved allegations of trade secret theft and misappropriation of proprietary information by these former executives. Banq has taken legal action against the former employees, accusing them of launching Fortress NFT using stolen trade secrets and engaging in fraudulent activities to conceal their actions. The matter is currently being arbitrated.
These legal disputes and bankruptcy filing have implications for the wider cryptocurrency custodian industry. Prime Trust previously faced significant challenges when it was sued by Celsius for withholding $17 million. In addition, the temporary halt of TUSD minting on Prime Trust caused concerns among investors. Although TUSD’s pegged price was temporarily disrupted, it quickly regained stability within three days. However, users faced difficulties redeeming TUSD as a result. Despite these concerns, the team behind TUSD reassured users that their operations were functioning smoothly and aimed to restore confidence in the stablecoin.
These events highlight the complexities and challenges faced by custodians in the cryptocurrency industry. The legal disputes and bankruptcy filing of Banq, a subsidiary of Prime Trust, have raised uncertainties about its future and its relationship with its new parent company, BitGo. The temporary halt of TUSD minting on Prime Trust also emphasized the potential risks and disruptions that can occur in the cryptocurrency ecosystem.
Source: [Celsius creditors aim to expose FTX users](https://bitcoinist.com/celsius-creditors-aim-to-expose-ftx-users/)
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About the author - J-S Tremblay
I've been involved in the cryptocurrency world since 2016 and trading since 2019. I started Moon and Lambo in 2021. I'm passionate about crypto and love to share my knowledge. I hate bankers and I hope that cryptocurrency will change the financial world for the better. View full profile...
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