Crypto custodian Prime Trust lost $6 million of client funds and $2 million from its own treasury in a doomed investment in the terraUSD algorithmic stablecoin, CEO Jor Law said in a Thursday court filing.
Law, who took his role on Nov. 29 after serving on the board, also cited a January 2021 incident in which customers were told to send funds to the wrong wallet, inaccessible to the company, after which the company had to spend $76 million to buy ether (ETH) to fund withdrawal requests.
The witness statement filed as part of bankruptcy proceedings is the latest in a series of allegations of financial mismanagement and poor governance in the crypto sector, which has seen former executives including Celsius’ Alex Mashinsky and FTX’s Sam Bankman-Fried pleading not guilty to multiple fraud charges.
In June, Prime Trust – which shortly after was taken into receivership and filed for bankruptcy – had a customer shortfall of $861,000 in digital currency and nearly $83 million in fiat, Law told the Delaware court.
The May 2022 collapse of Terra – which sought to use automated trading to peg its value to the U.S. dollar – ricocheted across the sector, heralding a new crypto winter.
But even after then, the Prime Trust group “continued to ramp up spending, at times incurring seemingly excessive expenditures,” Law said, saying that in November 2022 the company – not yet run by him – spent $11.1 million against revenues of just $2.7 million.
Prime Trust had been set to be acquired by rival custodian BitGo, but the buyer pulled out amid concerns over Prime’s financial health in June – concerns that proved well-founded just five days later when Nevada regulators filed to place the company and its parent, Prime Core Technologies, into receivership.
