- Prime Trust, a partner of Binance US exchange, suffered a loss of $8 million due to the collapse of TerraUSD.
- The loss was incurred as a result of the company’s investment with customer funds.
- Governments are striving to prevent crypto companies from using customer funds.
Prime Trust, a partner of Binance US exchange, suffered a loss of $8 million due to the collapse of TerraUSD. The loss was incurred as a result of the company’s investment with customer funds. Governments are striving to prevent crypto companies from using customer funds.
The Impact of Terra’s Collapse
Prime Trust, a partner of Binance US exchange, recently declared bankruptcy. The company initially wanted to be acquired by BitGo, but backed out after the magnitude of the losses became clear. Similarly, Binance exchange had also initiated moves to acquire FTX at the end of 2022 but backed out when it realized it would be detrimental.
Prime Trust Goes Bankrupt
Prime Trust, a crypto custody company, admitted to losing $8 million in customer and corporate funds due to the collapse of TerraUSD. The custody company lost $6 million from customer funds and $2 million from its corporate treasury.
Regulatory Scrutiny
In June, Prime Trust was handed over to a trustee after losing access to a crypto wallet hosted by a third party in 2021. According to court documents, the company owes its customers about $82 million in fiat and $861,000 in crypto. The Nevada Department of Financial Institutions also accused the company of using customer funds to acquire crypto companies. Regulators also ordered the company to stop serving individual customers.
Conclusion
Since the bankruptcy filing, the company has removed the executives responsible for the wallet scandal. Prime Trust started serving crypto customers in 2018, when the banking sector largely stayed away from the industry. The company took on a significant role by holding assets on behalf of customers and keeping customer dollars in various banking partners. One of its first customers was Celsius, which filed a lawsuit to collect its $17 million in crypto assets. With the collapse of Terra, Celsius also went bankrupt. New laws in Hong Kong and South Korea and new regulations in Singapore require customer and company assets to be separated. Earlier this year, the US Securities and Exchange Commission (SEC) sued Binance exchange for allegedly mismanaging customer funds. Regulators also accuse former FTX boss Sam Bankman-Fried of trading with customer funds.
