Prime Trust’s post-bankruptcy trust accuses Swan Bitcoin of using privileged access to drain assets before the custodian’s collapse.
The post-bankruptcy trust of Prime Trust has filed a lawsuit against Swan Bitcoin in Delaware bankruptcy court, accusing the Bitcoin services company of exploiting insider information to drain nearly one billion dollars in assets from the custodian in the days leading up to its bankruptcy in August 2023.
The complaint targets Electric Solidus, the corporate entity behind Swan, and the allegations are detailed: the company allegedly received more than $24.6 million in cash, 11,994 Bitcoin (currently valued at approximately $923 million), roughly $5 million in USDT, and smaller amounts of other digital assets before Prime Trust declared bankruptcy. At the center of the accusations is an unidentified senior Prime Trust executive who, while employed by the company, was also a paid consultant for Swan under a secondary agreement dating back to July 2019.
Four days before Prime Trust met with Nevada regulators on May 26, 2023, the executive allegedly opened an encrypted chat with Swan CEO Cory Klippsten, setting messages to auto-delete every 24 hours. The feature was reportedly disabled the day after the meeting, at which point Swan allegedly withdrew more than 10,000 Bitcoin from Prime Trust. The complaint cites Slack communications showing Prime Trust staff rushing to process the transfers before the close of business.
According to the lawsuit, Swan also allegedly turned a partial asset transfer into a full evacuation of funds the day before the meeting with Nevada regulators. The complaint further states that Prime Trust created an internal ledger called “PT FBO Swan Customers” on May 25 — an account that had not previously existed — with the aim of making it appear that Swan’s funds had always been held in a separate trust, thereby making recovery in bankruptcy proceedings more difficult. “In substance, however, those assets had not been and were not held in trust for the benefit of Swan’s customers,” the lawsuit states.
The complaint directly quotes Swan’s strategy: “Swan knew it needed to transfer fiat and crypto from Prime immediately before Prime filed for bankruptcy, to avoid catastrophic losses.” The lawsuit is part of a broader effort by Prime Trust’s trust to recover assets transferred out of the custodian in the weeks preceding its collapse. The plaintiffs are seeking recovery of funds under Bankruptcy Code provisions relating to preferential transfers and fraudulent transfers, and are asking the court to disallow any future claims Swan might assert against the bankruptcy estate until restitution is made.
