- Prime Trust custodied over $3.8B in cryptocurrency and fiat in late 2021
- Luna lost billions in value after the implosion of Terra LUNA in 2022
- Prime incurred a net loss of $16M at the end of 2022
According to newly appointed Prime Trust CEO Jor Law, the company lost almost $24 million to poor investments as bankruptcy was looming and spent $76 million of its own assets to fund customer withdrawals.
A Thursday court filing shows Prime Trust was processing over 308,000 transactions per day on average, had opened 2.8 million new custodial accounts, custodied over $3.8 billion in cryptocurrency and fiat currency assets, and facilitated over $309 billion of fiat currency movement at its zenith in late 2021.
The impact of 2022’s crypto winter
The broader market suffered several major liquidity events in 2022, culminating in “crypto winter.” Luna lost billions in value after the implosion of Terra LUNA, making this a key catalyst in the acceleration of crypto winter. While it didn’t directly cause Prime’s problems, the company felt the ripple effect.
Excessive spending
Despite the new realities of declining revenue, Prime Trust incurred excessive expenses due to poor investments. In October 2022, its prior management incurred a net loss of approximately $7.4 million and another net loss of $8.4 million a month later.
Moreover, an investment by Prime Trust’s former management of treasury and customer funds in TerraUSD (UST) led to a loss of $6 million in customer funds and $2 million in treasury funds.
The 98f Wallet issue
In March 2018, Prime Trust set up cold-storage wallets to hold and maintain ETH, BTC, and other assets. One of these wallets was 98f. In mid-2019, Prime moved its crypto assets to the Fireblocks Platform, maintained by Fireblocks LLC. They believed the migration was complete and one could access all available wallet addresses used on Fireblocks.
In December 2021, a client requested an ether withdrawal of a particularly large amount, which Prime found it couldn’t fulfill. Employees determined users had forwarded cryptocurrency assets to the 98f Wallet, which was outside Fireblocks. Thus, Prime couldn’t access the crypto stored in the 98f Wallet.
The company had to withdraw fiat from client accounts to buy ether and fulfill withdrawal requests. Prime bought ether worth $76.4 million from December 2021 to March 2022 to fund withdrawals and still cannot access the 98f Wallet.
