Prime Trust troubles mount as more crypto firms terminate ties, citing the need to safeguard customers’ assets. The custodian has seen more firms disclose rescinding existing agreements to prioritize the safety of customers’ assets.
Swan is leading the exodus by declaring they withdrew their users’ funds timely before the Prime Trust boat hit rock bottom. Coinbits replicated the move as it admits abrupt suspension of most services to seek a solution to the custodian challenge.
Coinbits Leads Prime Trust Fallout
Coinbits confessed in a Wednesday, June 28 tweet that many firms that have previously boasted as Bitcoin only disguise their inherent struggles. Coinbits added that the identity of the struggling firms remains unknown. Nonetheless, the platform involved in purchasing, selling, and saving Bitcoin declared to lodge a spirited fight for its members whose digital wealth is stuck in the firm.
Coinbits reiterated that it desired not to disclose the issue despite updating its users’ community via emails and website publications. Nonetheless, it conceived that announcing the ongoing challenge by addressing Bitcoin Twitter directly would deliver an in-depth understanding of the implications attributed to the Prime Trust meltdown.
Coinbis communication comes 24 hours following the Tuesday, June 27 decision by the Nevada Financial Institutions Division to place Prime Trust into receivership. The regulator cited the lengthy period when the custodian concealed financial health issues and only revealed them recently.
Prime Trust is battling allegations of losing old private keys and users’ assets misappropriation. The submission by the Nevada state’s regulator to the court estimated that Prime Trust plunged into an $82 million hole from accumulating fiat liabilities.
Scrutiny into Prime Trust submissions aided the discovery of its deceptive practices. The analysis concluded by Arkham Intelligence dismissed claims that Prime Trust has $68 million worth of digital assets. It alleged that the assets could sufficiently cover the clients’ claims of crypto deposits. Arkham Intelligence revealed that most funds are locked in illiquid AUDIO tokens leaving $7.5 million worth of Bitcoins.
Coinbits earlier conceived that while Prime Trust has sufficient bitcoin to settle its members’ balances. It revealed plans to orient its offering towards the no-custody solution. Despite the optimism, Coinbits suspended most of the services offered via its application.
Swan Addressing Dishonesty Label by Bitcoiners
Swan Bitcoin is facing the wrath of Bitcoiners who accuse the financial services firm of rapidly withdrawing assets that would have been trapped in Prime Trust. Bitcoiners allege Swan Bitcoin is deceptive for the swift withdrawal just before the custodian’s fallout.
Swan Bitcoin moved the clients’ assets to Fortress in a curious move since Scott Purcell steers the crypto custodian firm. The chief executive held the Prime Trust reigns till January 2021. A review of the written reorganization plan submitted by Banq attributes its troubles to mismanagement that began during the Scott Purcell reign. BitGo initially intended to acquire Prime Trust, only to rescind the decision a month later.
Most critics of Swan’s decision to withdraw funds just before Prime Trust called for clawbacks as the bankruptcy process takes shape. The criticism prompted Swan chief executive Cory Klippsten to dismiss such claims as speculations fed by pessimism. He indicated that it is impossible to administer clawbacks given centuries of precedents set by the trust legal structure.
Klippsten restated that the likelihood of initiating such clawbacks would prompt Swan to make the users whole. He dismissed, knowing that Prime Trust suffered insolvency before the swift withdrawal. Instead, he demonstrated that Swan planned its departure from the custodian firm nine months ago. He illustrated the plans to exit Prime Trust became evident when it moved some users and states to the BitGo platform earlier.
Klippsten admitted that Swan Bitcoin was compelled to pull the trigger and withdraw from Prime Trust when it lost Connecticut. He indicated that the regulator intended to force Prime Trust to dispose of the user BTC. He affirmed that Swan would readily withdraw from custodians losing states.
Integrating Brokerage and Custody Services Set to Invite Regulatory Scrutiny
Strike replicated Swan’s swift withdrawal. The Bitcoin lightning wallet confessed the narrow escape from Prime Trust by salvaging its users’ assets intact. Unlike Swan, Strike unlocked new features by opting for in-house custody services.
Swan dismissed the need to embrace the Strike approach, indicating it would soon invite regulatory challenges. Klippsten suggested that the regulators force the firms to separate custody from brokerage services just like the mainstream financial industry.
Swan’s chief executive indicated that few options exist for custodian services. He noted that users are wary of legally segregated yet susceptible to battling bankruptcy. He demonstrated that Prime Trust- Fireblocks lost its three-year dominance, with fintech now moving to Fortress-BitGo.