• Home
  • Scams
  • Prime Trust Lost $8M in Doomed Terra Stablecoin Investment

Prime Trust Lost $8M in Doomed Terra Stablecoin Investment

Aug 25, 2023 at 02:13 pm

In the tumultuous year of 2021, a series of unfortunate events unfolded under the watch of a cryptocurrency custodian. By the time July arrived and the company was placed in receivership, losses amounting to a staggering $76 million had been incurred – a somber narrative etched within the pages of a court affidavit.

Within this narrative, the spotlight falls on Prime Trust, a custodial entity entangled in a heavy investment into a stablecoin project that eventually crumbled, leading to substantial financial setbacks. The recent proclamation made by the CEO merely adds to the chorus of criticisms that have long echoed throughout the cryptocurrency sphere, painting a portrait of mismanagement and its enduring consequences.

The courtroom testimony provided by CEO Jor Law on a Thursday not too distant in time, unearths the disheartening details of Prime Trust's financial woes. The custodian bore witness to the erosion of $6 million from clients' holdings and an additional $2 million from its own coffers, casualties of a misguided venture into the algorithmic stablecoin realm, specifically the ill-fated terraUSD. This regrettable investment, fraught with implications, serves as a poignant backdrop to an earlier episode from January 2021. During this incident, customers found themselves inadvertently funneling funds into an inaccessible wallet, a mishap that coerced the company to expend a staggering $76 million on ether (ETH) procurement to honor withdrawal requests.

Embedded within the labyrinthine proceedings of bankruptcy, this testament stands as a recent chapter in the saga of allegations cast upon the cryptocurrency domain. The woes of fiscal mismanagement and lackluster governance persist, bearing testament to a trend that has embroiled notables like Alex Mashinsky of Celsius and Sam Bankman-Fried of FTX in multifaceted legal battles.

Recollections of June unfurl the dire financial straits in which Prime Trust was ensnared; digital currency deficits measuring $861,000 and fiat shortfalls nearing $83 million are unveiled within the solemn chambers of a Delaware courtroom. Amidst this financial turbulence, the reverberations of the May 2022 Terra collapse reverberated across the industry landscape. This project, which aspired to tether its value to the U.S. dollar through automated trading mechanisms, inadvertently signaled the arrival of a new epoch characterized by diminished cryptocurrency vibrancy.

Curiously, even subsequent to this tumultuous period, the Prime Trust collective exhibited an unyielding penchant for extravagant expenditure, alluded to by Law. A striking example is presented in November 2022, a time when the company, still under a different helm, splurged a colossal $11.1 million despite meager revenues that barely crested $2.7 million.

Prior to its somber descent into bankruptcy, Prime Trust had been poised for an acquisition by rival custodian BitGo. Regrettably, the deal unraveled in June, citing apprehensions regarding Prime's fiscal robustness. The aftermath validated these concerns, as a mere five days elapsed before Nevada's regulatory apparatus intervened, consigning both the company and its parent entity, Prime Core Technologies, to the custodial embrace of receivership.

Read more about

Related News

Sign up for daily crypto news in your inbox

Get crypto analysis, news and updates right to your inbox! Sign up here so you don't miss a single newsletter.