Recent legal disputes involving the Prime Trust, a prominent custodian, and the temporary moratorium on the TrueUSD (TUSD) mint have highlighted the challenges faced by custodians, as its subsidiary Banq has declared bankruptcy.
Remember, Prime Trust faced a lawsuit in 2022, accused of withholding $17 million by Celsius.
Bank bankruptcy file and its implications
On June 13, Banq, a subsidiary of Prime Trust, made headlines when it filed for bankruptcy in the US District Court of Nevada.
A bank that specializes in providing payment processing services tailored to cryptocurrency businesses.
in the bankruptcy file, Bank She disclosed her financial condition, reporting assets totaling $17.72 million while acknowledging liabilities of $5.4 million.
The company’s decision to seek bankruptcy protection at this particular juncture holds major ramifications.
The timing of Banq’s bankruptcy filing is notable, as it occurred less than a week after BitGo, another cryptocurrency custodian, acquired Prime Core Technologies, the parent company of Prime Trust.
This turn of events raises uncertainty regarding Banq’s prospects and its connection to Prime Trust.
The acquisition of Prime Core Technologies by BitGo introduces an additional layer of complexity, as the new parent company may have its own strategic priorities and plans, which could affect Banq’s path going forward.
In filing for bankruptcy, Banc Bank made a troubling revelation.
The company stated that an “unauthorized transfer” of $17.5 million of its assets was made to Fortress NFT Group, a company founded by the former Banq CEO, CTO, and CPO.
The unauthorized transfer also included allegations of theft of trade secrets and misappropriation of proprietary information by these former bank executives.
Banq has taken legal action against the former C-suite employees, accusing them of launching the Fortress NFT by using stolen trade secrets and engaging in fraudulent activities to conceal their actions.
The case was initially directed to arbitration by the court in January, and proceedings are still ongoing.
Implications for cryptographic custodians
Prime Trust faced major challenges when Celsius brought it up in 2022.
The suit alleged that the Prime Trust withheld $17 million, adding to the ranger’s problems.
Further fallout from the custodian’s difficulties came when Stablecoin TrueUSD (TUSD), a digital asset pegged to the value of the US dollar, announced that it would pause TUSD staking on the Prime Trust.
This announcement caused a temporary disruption in the peg of the TUSD coin to the dollar, which led to concerns among investors.
However, within three days, TUSD had recovered its peg, which eased some of the concerns.
Due to the TUSD resolution, users have reported experiencing issues redeeming their TUSD.
Despite the concerns raised, the team behind TUSD has reassured users that their operations are running smoothly, with the goal of restoring confidence in the stablecoin’s redemption.
Featured image from iStock, charts from TradingView.com
